Pets at Home Group Plc
Annual Report and Accounts 2016
More specialist, most loved
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Our mission is to be the
best pet shop in the world.
Pets are the heartbeat of our business.
We aim to share our knowledge and
passion to help pets and their owners
live long and happy lives together.
To achieve our mission we must be:
More specialist
Maintaining and enhancing our specialist
credentials gives pet owners more reasons
to shop with us. We can do this by providing
our customers with inspirational retail and
services, expert advice, unmatched range
and seamless omni-channel convenience.
Most loved
As pet owners too, we can understand
and help support our customers through
all the moments they share with their pet.
Sharing our love and passion for pets
strengthens the bond with our customers
and their trust in our colleagues and brands.
With responsibility
at the heart of our business
Putting Pets Before Profit is our number one value.
Responsible retailing is critical to maintaining our
reputation and ongoing business success.
Throughout this report you will see the above icons which represent our approach
to being the most specialist, loved and responsible pet retailer.
Visit our online
Annual Report 2016:
petsathome.annualreport2016.com
Pets at Home is the UK’s leading specialist retailer of pet
food, pet products and pet-related services.
Our omni-channel retailing business operates from a UK
wide Pets at Home store network and website. We run the
UK’s largest small animal veterinary practice network under
the Vets4Pets brand, together with a number of specialist
veterinary referral centres. We are also the leading operator
of dog and cat grooming services through our Groom
Room salons.
Revenue (£m)
£777.8m +6.7%
2012
2013
2014
2015
2016
544.3
598.3
665.4
729.1
777.8
Gross margin (%)
54.5% +31bps
2012
2013
2014
2015
2016
53.7
54.1
53.8
54.2
54.5
EBITDA margin (%)1
16.0% -38bps
2012
2013
2014
2015
2016
16.3
16.2
16.4
16.4
16.0
Basic Earnings Per Share1
15.1p
+11.2%
Like-for-like growth (%)
2.2%
2012
1.4
2013
2014
2015
2016
2.6
2.4
2.2
4.2
EBITDA (£m)1
£124.7m +4.2%
2012
2013
2014
2015
2016
88.9
97.2
109.4
119.6
124.7
Free cash flow (£m)1
£77.8m +8.1%
2012
2013
2014
2015
2016
39.8
67.8
50.1
72.0
77.8
Dividend Per Share
7.5p
+38.9%
All 2016 financials refer to the 52 week proforma period to 24 March 2016.
1 Excludes exceptional costs.
Strategic report
Overview
Highlights
The year in review
Our history
At a glance
Market overview
Business model
Chairman’s statement
Strategy
Chief Executive’s statement
Mission and strategy
Strategy in action
Key performance indicators
Performance
Finance review
Operating review
Risk management
Risks and uncertainties
Corporate Social Responsibility
Governance report
Governance overview
Board of Directors
Executive Management Team
Directors’ Report
Statement of Directors’ Responsibilities
Governance Report
Audit & Risk Committee Report
Nomination & Corporate Governance
Committee Report
Remuneration Report
1
2
4
6
8
10
12
14
18
20
26
30
34
38
40
44
60
62
64
66
73
74
82
86
88
Financial statements
Independent Auditor’s Report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of changes
in equity as at 31 March 2016
Consolidated statement of changes
in equity as at 26 March 2015
Consolidated statement of cash flows
Company balance sheet
Company statement of changes in equity
as at 31 March 2016
Company statement of changes in equity
as at 26 March 2015
Company income statement
Company statement of cash flows
Notes (forming part of the financial
statements)
Advisors and contacts
109
113
113
114
115
116
117
118
119
119
119
120
121
172
1
Pets at Home Group PlcAnnual Report and Accounts 2016
The year in review
Delivering a seamless
pet shopping experience
Specialist referral
veterinary care market
We made our entry into the specialist
referral market through the acquisition
of two centres, Northwest Surgeons
and Anderson Moores.
A snapshot of our progress
Delivered our rollout targets
for both stores and services
Made our entry into the specialist
referral veterinary care market
New openings
20
new Pets at Home superstores (net).
Total portfolio 419
Grew our VIP loyalty club to
more than 4.5m members,
with more than 13.5m pets
Significantly expanded our
online product range and
leveraged our UK wide store
network, with 50% of online
orders now collected in-store
50
new veterinary practices.
Total portfolio 388
60
new grooming salons.
Total portfolio 240
Exciting trial retail formats
Opened six new Barkers stores, our High
Street based specialist dog shop and
grooming spa.
Opened one Whiskers ‘n Paws, our High
Street based convenience store, focused
on core Pets at Home dog and cat
customers, with a Groom Room salon.
2
Pets at Home Group PlcAnnual Report and Accounts 2016 Product and innovation
Grew our online range to 12,000
products, over 4,000 greater than
the range in-store.
Expanded our private label Wainwright’s
into frozen dog food.
UK exclusive launch of Wellness Advanced
Nutrition, the number one independent,
family owned brand of natural pet food
in the US market.
12,000
products available in stores and online
Responsibility at the heart
of our business
Industry leading colleague
retention and engagement
Passionate and expert colleagues are
central to our success, creating more
reasons for customers to come into store
and engage with us. Maintaining industry
leading retention and engagement rates
is vital to retaining our specialist edge.
Our colleague training has been endorsed
by City & Guilds, providing a stamp of
approval that demonstrates the value
of colleague expertise.
79%
colleague retention
7th
place in Great Place
to Work survey
VIP loyalty card lifelines
We award lifelines for every purchase
our loyalty card members make.
Lifelines convert into donations for
our VIP members’ chosen animal
charities. This year we have raised
over £1.8m for animal charities
throughout the UK, and since
inception have raised £4.2m.
£1.8m
raised by our VIP
club members
Read more on page 34
Read more on page 44
3
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Our history
Celebrating
years at the forefront
of pet retailing
Pets at Home
founded; first store
opens in Chester.
store
15
colleagues
Support Adoption
For Pets founded,
a charity dedicated
to rehoming pets.
Wainwright’s private
label food brand
launched.
Launch of new
e-commerce website.
Voted Employer of
the Year in Retail
Week’s ‘people in
retail’ awards.
4,100
colleagues
1991
1999
2003
2006
2007
2008
2009
2012
2013
2014
2015
2016
National Distribution
Centre opens in
Stoke-on-Trent.
2,600
colleagues
First in-store
veterinary
practice opens.
Pets at Home
acquires PetSmart
in the UK.
144
stores
In-store pet adoption
scheme launched
with Support Adoption
For Pets.
200
stores
4
Pets at Home Group PlcAnnual Report and Accounts 2016 We’re part of a growing family
where pets come first. Our number
one value is ‘Pets Before Profit’
427
stores
388
vet practices
240
grooming salons
4.5m
VIP members
7,900
colleagues
Launch of VIP
("Very Important Pet")
loyalty scheme.
Direct product sourcing
operation opened in Asia.
First trial Barkers store
opened in Wilmslow.
Initial Public Offering
– Pets at Home lists on
London Stock Exchange.
1991
1999
2003
2006
2007
2008
2009
2012
2013
2014
2015
2016
Groom Room
services launched
in seven stores.
First acquisitions in the
specialist veterinary
referrals market.
Acquired Vets4Pets to
create network of 236
first opinion vet practices.
Voted The Sunday
Times best big
company to work for.
6,500
colleagues
360
stores
5
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance At a glance
Delivering an amazing pet experience through
an integrated retail and services offer
Merchandise
Pets at Home
Barkers
Whiskers ‘n Paws by Pets at Home
A trial format, dog focused High Street
store. Offering premium products and
grooming services targeted at highly
engaged dog owners.
A trial High Street based convenience
format, focused on core Pets at Home
dog and cat customers, with a Groom
Room salon.
7
stores and Barkersfordogs.com
1
store
Specialist referral centres
Northwest Surgeons in Cheshire
and Anderson Moores in Winchester
provide specialist referral services
to primary opinion practices.
2
referral centres
Pets at Home offers a range of
food and accessories through
a UK wide network of 419 stores;
59% of stores have a vet practice
and 56% have a grooming salon.
419
stores and PetsAtHome.com
Read more on page 34
Services
Vets4Pets
Our network of primary opinion
small animal veterinary practices,
operated in conjunction with our
Joint Venture vet partners.
388
practices both in-store and standalone
Read more on page 36
6
Pets at Home Group PlcAnnual Report and Accounts 2016 Merchandise
Read more on page 34
Services
Read more on page 36
Business model on page 10
Extensive UK stores and services
427
stores with 240 groomers
388
vet practices
Ride-away
A specialist retailer of equestrian supplies
with a website, catalogue and superstore
in York.
1
store and Rideaway.co.uk
The Groom Room
Our dog and cat grooming salons,
located predominantly in-store.
240
salons
7
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Specialist veterinary
referrals market
Our in-store and standalone Vets4Pets
practices offer primary opinion and some
specialist services for the small animal pet
market. Specialist referral centres provide
the most advanced services in veterinary
medicine, including oncology, neurology,
orthopaedics, cardiology and other procedures
that are too specialist to be offered within
any type of primary opinion practice.
Moving into specialist referrals gives
us access to an additional area of the
veterinary market. We also believe further
growth in this market will allow us to
increase our share of wallet with customers
who require specialist services that cannot
be satisfied by our primary opinion
practices, and build the reputation of our
brand with both vets and customers.
Market overview
Pets at Home is the clear leader
in the UK pet market
Competitive backdrop
Key market drivers
• Pet market has shown resilience
and premium growth to that of the
UK general retail market
• Advanced Nutrition and services are
the fastest growing areas
• Channel shift to online is slow but steady
• Pets at Home has more stores than
the six closest competitors combined
• The UK’s largest branded vet and
grooming salon network
• We have consistently grown our market
share across all segments
9m
dogs in the UK
9m
cats in the UK
Pet population
• Stable UK pet population of around 9m
dogs and 9m cats
• Shift in dog breeds towards specialist
and cross-breeds, which often require
grooming, are more likely to be fed on
Advanced Nutrition and whose owners
purchase higher levels of accessories
Humanisation of pets
• Treating pets as part of the family creates
a resilient market spend, with trends
towards premiumisation in both products
and services
Shift to Advanced Nutrition
• Switching to premium pet foods is driven
by their superior nutritional value and
resultant health benefits to pets
• The UK lags the US market in regard to
this trend, with 11% of the UK pet food
market penetrated by Advanced Nutrition
products, compared with 25% in the US
Use of vet and grooming services
• Vet services will be driven by the
increased availability of complex
procedures, widening insurance coverage
and a desire by owners to treat their
pets’ health as they would their own
• Grooming will be driven by both the pet
humanisation trend, as well as the
increasing popularity of specialist dog
breeds that often require grooming
• The UK market lags the US market in regard
to grooming popularity. In the UK, 4% of dogs
are groomed, compared with 10% in the US
The pet market has consistently grown ahead of UK general retail
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
2009
2010
2011
2012
2013
2014
UK Pet Products and Services market
Total UK Retail market
)
%
(
h
t
w
o
r
g
l
a
u
n
n
A
8
Pets at Home Group PlcAnnual Report and Accounts 2016
Mission and strategy on page 18
Pet market has shown resilient growth, even through recession
£bn
6.0
5.0
4.0
3.0
2.0
1.0
0
7.5%
9.5%
1.0%
2 . 6 %
0.3%
11.2%
3.3%
1.4%
14.0%
10.4%
0.4%
1.9%
2.0%
3.8%
5.3%
4.1%
2008
Source: OC&C data
2012
2014
UK pet care market value £6.1bn (2014)
Food
Advanced Nutrition
Treats
Other food
Accessories
Health & Hygiene
Other accessories
Services
Insurance
Grooming
Vet services
Food
Advanced Nutrition
Treats
Other food
Accessories
Health & Hygiene
Other accessories
Services
Insurance
Grooming
Vet services
Source: 2014 data, OC&C consultants
£0.27bn
£0.40bn
£1.77bn
£0.35bn
£0.46bn
£0.84bn
£0.22bn
£1.74bn
8.6%
online value of the total pet market
Leading UK pet care and vet market shares
Food and treats
Advanced Nutrition
Accessories
Vet services
9% Other
3% Online specialists
3% Pet specialists and vets
12% Online specialists
15% Other
35% Pet specialists and vets
11% Online specialists
22% Pets specialists and vets
78% Independents
72% Grocers
14% Pets at Home
53% Pets at Home
16% Grocers
36% Pets at Home
13% Corporates
9% Pets at Home
2014
2014
2014
2014
Source: OC&C data. Vet corporates include CVS, Medivet and Independent Vet Care
9
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Business model
Delivering the ultimate specialist
pet shopping experience
Seamless shopping experience
Passionate and
expert colleagues
As pet owners too, our store, vet and
grooming colleagues can understand
and help support our customers
through all the moments they share.
An industry leading colleague retention
rate and externally accredited training
courses ensure we can share our
knowledge as well as our passion.
93%
of store colleagues own a pet
In-house innovation
and global sourcing
By liaising directly with our suppliers,
our teams can ensure better quality,
improved pricing, unique design,
and greater speed to market with
our products.
40%
of products were refreshed during the year
Responsibility at the
heart of our business
10
n i q u e capabilities
U
t
r
o
p
p
i n g and growing o
ur b
u
s
i
n
e
s
s
VIP club: s u
Engaged
pet owner
Our Pets People
Heart of the Community
Pets at Home Group PlcAnnual Report and Accounts 2016
Leading private
brands and exclusives
Our private labels, across both
food and accessories, deliver high
quality products at value prices.
Exclusive product launches ensure
we are always delivering something
new and different to our customers.
Wainwright’s
is our largest private label brand
One stop shop for retail
and services
We have the only branded vet and
grooming chains of scale in the UK.
Our stores offer UK pet owners the
only destination where they can shop
for product and participate in pet
services, all under one roof.
46%
of our stores contain both a vet practice
and a grooming salon
Drives revenue streams
Merchandise
Services
Revenue
Revenue
£696.5m
+4.6%
£81.3m
+29.2%
Services & Other
Vet practices
Veterinary specialist
referral centres
Grooming salons
Insurance
Pets
Food
Advanced Nutrition
Grocery food
Treats
Other pet foods
Accessories
Pet homes and habitats
Toys, collars, leads, clothing
and other accessories
Health and Hygiene products
Merchandise on page 34
Services on page 36
Our Pets Environment
Sourcing with Integrity
Corporate Social
Responsibility on
page 44
11
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance
Chairman’s statement
Our progress throughout the
year has ensured we have
retained our place as the
leaders in the UK pet market
12
I am pleased to report
another year of good
progress for the Group.
We have continued to
deliver on our strategic
goals and have improved
shareholder returns.”
Tony DeNunzio
Non-Executive Chairman
This year marked a number of key milestones
in the Group’s development. We created a
divisional operating structure based around
Retail and Services, each headed by its own
divisional CEO to help focus resources and
better manage our future growth; we made
our entry into the Specialist referrals area of
the veterinary market with the acquisitions of
Northwest Surgeons and Anderson Moores;
and we continued to innovate in terms of
new retail store formats with the expansion
of Barkers for dogs and the introduction of
our Whiskers ‘n Paws concept.
In line with our strategic objectives, we
have grown like-for-like sales, improved
gross margin and expanded our footprint.
In the year as a whole, revenue increased
6.7% to £777.8 million, with like-for-like
growth of 2.2% supported by the rollout
of new stores and the expansion of services.
Our growth was underpinned by our strength
in Advanced Nutrition, our award-winning
VIP customer loyalty programme, where we
have seen membership grow to 4.5 million,
and the development of our seamless
approach to shopping, with traffic to our
website www.PetsAtHome.com growing
strongly. These factors offset the weakness
Pets at Home Group PlcAnnual Report and Accounts 2016 in our Health & Hygiene ranges where
seasonal factors induced a revenue decline
compared to a particularly strong prior year.
We expanded gross margin by 31bps to
54.5% and pre-exceptional basic EPS grew
by 11.2% to 15.1 pence. We also expanded
our core business further with net openings
of 20 Pets at Home Superstores, 60 grooming
salons and 50 veterinary practices.
Shareholder returns
Pets at Home is a growing business
with consistently strong cash generation.
Recognising the importance of dividends
to shareholders, the Board intends to
increase the target for ordinary dividend
payments from 40% to around 50% of
earnings. Accordingly, for the financial year
2016, the Board has recommended a final
dividend of 5.5 pence per share, resulting
in a total dividend of 7.5 pence per share.
With significant opportunities for expansion,
particularly in the veterinary market, our
priority remains to invest to support our
future profitable growth. Since the year end
we have acquired two further specialist
referral centres, Dick White Referrals and
Eye-Vet Referrals, and we anticipate further
bolt-on acquisitions in the UK veterinary
market. Should we not foresee appropriate
investment opportunities in the future, then
we will return surplus capital to shareholders.
Management changes
At the end of the financial year we
announced the appointment of Ian Kellett
as Group Chief Executive Officer. Ian has
been a member of the Group’s Board for
ten years as Chief Financial Officer and
more recently as Chief Executive Officer of
the Retail Division. Ian’s appointment follows
the resignation of Nick Wood who wishes to
return to London to be with his family after
a period of more than eight years based in
the North West of England. Nick will remain
in an advisory role until 1 July 2016 to
ensure a smooth transition of responsibilities.
A search is underway to identify a Group
Chief Financial Officer. Until a permanent
appointment is made, Mark Adams has
been appointed as Interim CFO.
As a consequence of Ian’s appointment to
Group CEO, Peter Pritchard has been promoted
to the role of Chief Executive Officer of the
Retail Division following his successful tenure
as Chief Operating Officer in that division.
Completing the executive management team,
Sally Hopson remains as Chief Executive Officer
of the Services Division and Louise Stonier as
Group Legal Director and Company Secretary.
These appointments are consistent with
the Board’s succession plan. Ian has
demonstrated a strong vision for the Group
and I am sure he will continue to provide
excellent leadership. I would also like to
welcome Mark to the Group as Interim
CFO and to thank Nick for steering the
business so capably over the last four
years, particularly in overseeing the Group’s
Initial Public Offering in 2014. I believe
we have an excellent executive team to
provide strong leadership to the business
in the period ahead.
Colleagues
As we enter our 26th anniversary year
I would like to thank our colleagues
throughout the business for their loyalty
and enthusiasm. It is their knowledge and
passion that creates the bond we share
with our customers – the love of pets.
The Government’s introduction of the
National Living Wage from April provides a
cost challenge for all retailers. The Board
believes it is vital that we stay true to
our core values if we aim to retain our
market leading colleague retention levels.
Consequently, we have decided that all
colleagues, irrespective of their age, should
receive the National Living Wage rather
than only those aged 25 or over. And we
have decided to retain our ‘Learn to Earn’
model that allows colleagues to increase
their hourly rate in increments as they
complete additional specialist training.
Looking ahead
We remain confident that growth in the
UK pet market will continue to support
our growth ambitions for the business.
With a strategy that is working, a strong
leadership team in place and an
organisational structure that focuses
on the potential for profitable growth
in both retail and services, we remain
confident in the outlook for the Group.
Tony DeNunzio
Non-Executive Chairman
25 May 2016
Board of Directors
Read more about the Board and
our governance on page 60.
Tony DeNunzio CBE
Non-Executive Chairman
Dennis Millard
Deputy Chairman and Senior
Independent Non-Executive Director
Ian Kellett
Group Chief Executive Officer
Amy Stirling
Independent Non-Executive Director
Paul Coby
Independent Non-Executive Director
Tessa Green CBE
Independent Non-Executive Director
Paul Moody
Independent Non-Executive Director
Brian Carroll
Non-Executive Director
Membership of the Board
Non-Executive Chairman 1
Executive Directors
Non-Executive Directors
1
1
Independent
Non-executive Directors
5
Gender breakdown
Board of Directors
Male
Female
75%
25%
All 2016 financials refer to the 52 week proforma period
to 24 March 2016.
Governance overview on page 60
13
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance
Chief Executive’s statement
I am pleased to report on
another good year of progress
and look forward to my first full
year as Group Chief Executive
We enter our 26th year
confident in the future. The
pet market has proved over
time to be more resilient
than general retail, so whilst
consumer confidence may
be more fragile, we believe
our drive to become more
specialist and most loved
by customers will deliver
further progress.”
Ian Kellet
Group Chief Executive Officer
14
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic update
Strategic pillar: Expanding like-for-like
growth
Growing loyalty from our VIP club members
Our loyalty scheme has continued to
provide support to like-for-like growth
this year, through tailored offers on both
products and services, alongside achieving
an increased level of engagement with
our members.
The VIP club has reached over 4.5m
members with over 13.5m pets registered
on our database. The scheme is now over
three years old, which has enabled us to
take an initial view of the active customer
base, as well as total membership. The
number of VIP members who have actively
used their card over the past 12 months
is 3.3m. The active member participation
rises for those customers who are multi-
brand users, whether that be through our
vet practices, grooming salons or online,
reflecting the increased loyalty of such
customers. We will therefore continue with
our strategy to introduce vet and grooming
services to our members through active
marketing, as well as the rollout of services
within the store estate, which remains
a significant opportunity for us.
Our swipe rate of the card in stores
reached 64% in Q4. We expect to see
further progression in the swipe rate this
year, but at a slower rate than we have
seen previously, which is a normal trend
reflective of the club’s maturity.
Positively, we are seeing an increasing
revenue contribution from our earliest
enrolled members, which reaffirms our view
that we are successfully using the club to
drive incremental spend from customers.
4.5m
VIP club members
13.5m
pets registered on our database
Providing value for our customers
Our approach is to provide value for our
customers, reflecting innovation, quality,
expertise and customer service, as well
as price.
As part of this, we have continued to
refresh our range, with 40% of total
products changed during the year. Growing
Advanced Nutrition revenue remains core
to our strategy and this year we extended
Wainwright’s into the frozen category,
added Lily’s Kitchen to our range and
exclusively launched Wellness, which is
the leading independent natural food brand
in the US. We are also adding brands to
assist customers with bridging the gap to
the top tiers of Advanced Nutrition, which
we believe is encouraging customers to
trade out of the grocery food segment.
In March, we launched our Brandmatch
promise for customers. Brandmatch
compares the price of the branded products
in our customers’ baskets against both
Tesco and Jollyes, and if there is a difference,
generates a money back voucher for their
next shop. This is automatically emailed
to the customer if they are a VIP member.
Brandmatch is still very new, but initial
results indicate the vouchers are
encouraging incremental spend from
customers when they next purchase.
Delivering results from our seamless
shopping investment
We have invested further in our seamless
shopping strategy this year, through
optimising our website, upgrading systems
and expanding our colleague teams to deliver
the plan. This has resulted in good traffic
growth to our website, enhanced conversion
rates and an improved customer experience.
Mission and strategy on page 18
As we have highlighted previously,
customers are increasingly opting to
collect their online orders in store. This
method of pickup represented around 50%
of our online revenues in the second half
of the year, up from just over 40% in the
prior year. This increase has been achieved
through improving our collection service
in-store and continual optimisation of the
product range.
The VIP App is now in its final stages
of development, ahead of a colleague,
and then customer, launch. The App will
give further benefits to our customers,
making it simpler to both swipe without
the need for a card and redeem offers
without presenting a voucher.
Strategic initiatives in our
veterinary business
Within our primary opinion vet practice
network we are rolling out new practices,
but at the same time, we have focused on
strategies to deliver extra growth to our
more mature practices. We have achieved
this through space expansions to eight
existing practices and trialling 24/7 or
extended opening hours in six practices.
Both space and opening hours extensions
are bringing even greater convenience to
our customers and are delivering additional
revenue to these practices.
We have also built a presence in the
specialist referrals market through
acquisition. Specialist referral represents
the premier tier of veterinary medicine, and
by acquiring such centres, we gain access
to an additional area of customer spend in
the market, whilst improving the retention
of customer revenue from our primary
opinion practice network.
15
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Chief Executive’s statement continued
We now have four specialist referral
centres and have focused on acquiring
those with the best reputations for clinical
excellence and service, in locations
which are complementary to our primary
practice network. We continue to explore
opportunities in the wider veterinary
services market that will deliver growth
to our business, at an acceptable rate
of return on our investment.
Engagement with our customers
Alongside our ongoing customer engagement
through our colleagues in-store and the
VIP club, we have continued with television
advertising during the year, both with
the Pets at Home and Vets4Pets brands.
We are the only branded veterinary
services business in the UK with the
scale to advertise nationally.
Our customer engagement and advocacy
levels are indicated through a net promoter
score, which is collected though an online
customer survey. Our net promoter score
for the year was 88%, up from 86% in the
prior year, having risen from 75% in FY11.
Strategic pillar: Space rollout and
footprint development
We executed our rollout strategy successfully
during the year, having achieved our store
and services opening targets.
Our Pets at Home estate now numbers
419 superstores and we plan to open
between 15 and 20 superstores in FY17.
As we come closer to reaching our UK
target of around 500 superstores, our
location options narrow, and as we
are mainly dependent upon space from
new retail park openings, we are seeing
an impact on our opening rate. During
the year we continued with the rollout
trial of our premium Barkers dog stores.
We also commenced a new trial format,
with a High Street based convenience
store, branded ‘Whiskers ‘n Paws by
Pets at Home’.
16
419
Pets at Home superstores
60
new grooming salons in both new
and existing stores
In Services, we ended the year with
388 veterinary practices, having opened
39 in new and existing stores, and 11 in
standalone locations. Nearly 60% of our
store estate now has a vet practice and
we remain committed to working towards
our target of 90% of stores with a practice.
Grooming salon openings progressed
strongly, with 60 new salons in both new
and existing stores, taking the total number
to 240. In the coming year, we expect to
open 45–55 new veterinary practices and
50–60 grooming salons.
The performance and returns of new
stores, vet practices and grooming salons
remain in line with our expectations.
Pets at Home Group PlcAnnual Report and Accounts 2016 Targeting new areas of the veterinary
market through specialist referral centres
Our recent acquisitions have allowed
us to access the most advanced tier
of the veterinary market and will build
the reputation of our brand with both
vets and customers.
Specialist referral centres provide veterinary
services that are too complex for primary
opinion practice, through the advanced
qualifications of the practising surgeons,
state of the art operating theatres and
diagnostic equipment.
We acquired two referral centres during
the year:
• Northwest Surgeons, based in Cheshire,
has ten veterinary specialists and acts
as a referral centre for practices in the
North West of England. It specialises
in orthopaedic, soft tissue and spinal
surgery and internal medicine with support
in anaesthesia, pain management and
diagnostic imaging.
• Anderson Moores veterinary specialists,
based near Winchester, has 25 referral
clinicians and provides referral expertise
in internal medicine, soft tissue surgery,
orthopaedic surgery, cardiology, neurology
and neurosurgery, diagnostic imaging,
dermatology and anaesthesia. Anderson
Moores is equipped with dedicated
MRI and CT scanners, state of the art
operating theatres and a range of other
specialist facilities.
Strategic pillar: Growing margins
We have seen a strong progression in
the Group gross margin this financial year,
growing by 31bps to 54.5%. Merchandise
margin benefitted from our Advanced
Nutrition growth and improved terms
negotiations with suppliers. In Services,
we saw positive support from the
maturation of our vet practices, although
this was partially offset by the number of
immature grooming salons and the addition
of lower margin specialist referral centres.
Our pre-exceptional EBITDA margin declined
by 38bps to 16.0%, also reflecting the
mix impact of specialist referral centres,
alongside our commitment to strategic
investment in seamless shopping and
our colleagues, investments which we
maintained despite some of the top line
challenges we saw during the year.
Looking forward, we expect to see support
to our Group gross margin from further
Advanced Nutrition growth and services
maturity, but this will be more than offset
in the current financial year by the impact
of weaker sterling. The National Living
Wage ("NLW") will be incorporated into
our colleague cost base this financial
year and as we have previously highlighted,
alongside our ongoing investment in
seamless shopping, will cause some
EBITDA margin dilution. Whilst the
progression in NLW over the coming years
is an ongoing cost pressure, we expect the
maturity profile of our vet and grooming
businesses to generate EBITDA margin
expansion in the medium to long term.
Ian Kellett
Group Chief Executive Officer
25 May 2016
All 2016 financials refer to the 52 week proforma period
to 24 March 2016.
17
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Mission and strategy
Delivery of our strategy across
the PawPrint supports growth
in like-for-like, space and margins
Our mission and strategy
Levers of growth
To be the best pet shop in the world
The PawPrint is the articulation
of our strategy
Pets Before
Profit
A truly
amazing place
to work
World class
shopping
The best
vets and
groomers
To be the
best pet shop
in the world
Friendly
experts
Always new
and exciting
At the heart
of every
community
18
To expand upon our leading position
in the UK pet care market
Grow like-for-like sales
We have multiple levers through which we can grow
like-for-like sales, creating diversified, sustained and
resilient top line growth.
• Product innovation
• VIP club
• Marketing
• Omni-channel
• Services
• Engagement
• Pricing
Grow space and optimise footprint
Rollout of new stores, vets and groomers across
the UK will enable us to grow market share.
• Optimised store rollout
• Services rollout of vet practices
and grooming salons
• Adjacent veterinary market growth
Grow margins
Focus on the areas that will enable long term gross
margin and operating margin improvements.
• Services
• Product mix and own brands
• Sourcing and terms
Pets at Home Group PlcAnnual Report and Accounts 2016
CSR strategy
Product innovation
Continually refreshed product range,
own brands and private labels, bringing
something new and innovative to customers.
VIP club
Grow our loyalty club, which delivers targeted
offers to customers and increases our share
of their spend.
Marketing
Customer brand engagement through
a focus on the emotional relationships
we have with our pets.
Omni-channel
Enable a seamless shopping experience,
where products can be delivered to home
or picked up in store. Create an online
community for pet owners to engage with us.
Services
Vet practices and grooming salons make us
a one stop shop for pet owners, increasing
customer visit frequency and loyalty.
Engagement
Maintain leading levels of customer
engagement with our highly trained colleagues,
which is essential to our success.
Pricing
Deliver value for money, reflecting product
range, exclusivity, convenience, quality,
service and price.
Read more on page 20
Putting responsibility
at the heart of our business
Our Pets People
Be a great place to work
Heart of the Community
At the heart of every local community
Sourcing with Integrity
Ensuring we maintain our number one
value, putting Pets Before Profit
Our Pets Environment
Efficiently using and respecting
all resources
Optimised store rollout
Open Pets at Home stores in optimal locations
to access unmet market spend and consider
smaller formats targeted at market subsegments.
Services rollout of vet practices
and grooming salons
Opening services within all new stores, as well
as retrofitting services into the existing estate,
driving customer loyalty and visit frequency.
Adjacent veterinary market growth
Into areas complimentary to our first
opionion practices.
Read more on page 22
Services
Growth and maturity of our higher margin
vets and groomers.
Product mix and own brands
Create an optimal balance of higher margin
Advanced Nutrition, own brand and private
label products.
Sourcing and terms
Build closer and improved relationships
with suppliers to leverage our market reach.
Read more on page 24
Read more on page 44
19
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Strategy in action
Grow like-for-like sales
Sharing our knowledge and
passion for pets, to help you make
the most of your lives together.
We’re here to help – friendly, accessible experts
helping customers to feed their pets better diets.
Graham Johnson is a Nutrition
Consultant in our Salford store
Graham joined Pets at Home two
years ago…
“Having completed the initial
Steps training, I was keen to
develop my expertise further, so I
decided to enrol on the Nutrition
course. It takes around six months
to complete and it gave me a huge
understanding of how important
an appropriate diet is for both
dogs' and cats' health and
wellbeing. In fact, I enjoyed the
course so much that I’ve gone
on to become a trainer myself!
I find a lot of customers are quite
surprised by the level of knowledge
our colleagues have. Our in-store
vet partner even refers his
customers to me when they want
to have a discussion around diet,
as the Nutrition course gives us a
depth of knowledge that is really
quite unique.
I want to see our customers giving
their pets the best diet they can,
but always within a budget that’s
appropriate. It won’t always be
right to advise a customer
to go for a top tier Advanced
Nutrition diet, if they are starting
from Economy dry food. Instead,
I will advise on a food that
positions in the middle. Ultimately,
it’s about what is best for the pet,
to meet their allergy or dietary
requirements, and not favouring
a particular brand.
I think that having such important
conversations with customers
about their pets allows me to
develop a relationship and bond
that’s really special. It’s incredibly
satisfying to see the positive
transformation in their pet after
having suggested some nutrition
changes. My regulars will often
plan their store visits to make
sure I’m around!”
Strategic link:
Sales of Advanced Nutrition were
a key support to like-for-like growth
during the year.
20
Pets at Home Group PlcAnnual Report and Accounts 2016
More specialist
Most loved
A responsible pet retailer
What we did in 2016
Future plans
Product innovation
• Refreshed 40% of our total product range
• Over half of new products were own brand
or private labels
• Launched new brands in Advanced Nutrition
VIP club
• VIP reached 4.5m members, adding 1.3m
during the year
• 13.5m registered pets on the database
• Swipe rate of the VIP card at our tills accounted
for 64% of store revenues
• Increased our share of VIP customers’
pet spend
Marketing
• Launched first Wainwright’s advertising
campaign
• TV sponsorship of ‘For The Love Of Dogs’,
one of ITV’s highest rated programmes
Omni-channel
• Expanded the online product range to 12,000,
around 4,000 more than in-store
• Leveraged our store base: c50% of online
revenues now derived from a collect in-store
delivery method
Services
• Retrofitted 16 vet practices and 30 grooming
salons back into our existing estate
Engagement
• Colleague retention rate remained strong
at 79%
• Customer feedback net promoter score
improved to 88%
Pricing
• Invested in competitive pricing across
accessories
• Widened our entry price range points
in some product categories
Continue to refresh our product mix, with new
private label and own brand launches, as well as
exclusive and innovative products that reflect the
latest trends, in order to improve customer loyalty
and visit frequency.
Grow loyalty and our share of VIPs pet spend
by promoting vet practice and grooming salon
services and targeted product offers.
Focus on new customer acquisition and brand
engagement through our understanding of the
love and emotional bond that owners have
with their pets.
Develop the link between our online and store
based offerings to give customers a seamless
shopping experience.
Refurbish and retrofit the existing estate
to accommodate further vet practices
and grooming salons.
Maintain our industry leading colleague retention
and engagement rates, in order to deliver
customers outstanding service and advice.
Deliver value for money pricing, which is reflective
of product range, exclusivity, convenience,
service, price and quality.
Relevant KPIs
2.2%
Group like-for-like growth
1.5%
Merchandise like-for-like growth
10.4%
Services like-for-like growth
Key risks associated
• Brand and reputation
• Competition
• Our people
• Business systems and information security
• Supply chain/sourcing
• Store and services expansion
• Regulatory and compliance
• Extreme weather
KPIs on page 26
Risk management on page 38
All 2016 financials refer to the 52 week proforma period
to 24 March 2016.
21
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Strategy in action
Grow space and
optimise footprint
We are bringing an amazing
pet experience to more pet
owners across the UK.
Creating a cohesive team through the store, vet
practice and grooming salon builds colleague
engagement and outstanding customer service.
Adam Wolstenholme is the store
manager at Prestwich, which opened
in January 2016…
“I’ve been working at Pets at Home
for more than 14 years and
Prestwich is my fourth store as
a manager. Having been with the
business for such a long period,
I know how important a happy,
talented team is to building
our success.
I helped to handpick the new store
team and made sure we achieved
a good balance of experienced
colleagues alongside new talent.
Between my assistant managers
and myself, we have more than
31 years' tenure at Pets!
To develop the team bond, and
knowledge, we spent a month
training together at the nearby
Salford store. One of my favourite
aspects about Pets is that the
learning and training just doesn’t
stop, no matter how long you
have been here. It’s a continual
process, and the more knowledge
and expertise we have, the more
our customers can benefit, which
in turn keeps my team engaged
and drives our business forward.
I’m really pleased that we will have
the full services offer at Prestwich.
It’s my job to ensure that all three
elements of the store, vet and
grooming offer knit together,
which means keeping all the
teams engaged as a solid unit.
Strategic link:
Recruiting and training talented
colleague teams is crucial in
supporting our space rollout
strategy.
22
Pets at Home Group PlcAnnual Report and Accounts 2016 More specialist
Most loved
A responsible pet retailer
What we did in 2016
Future plans
Optimised store rollout
• Opened 20 new Pets at Home superstores (net)
• Total portfolio of 419 superstores
• Trial formats: Opened six Barkers stores
and one Whiskers ‘n Paws
Vet practice and grooming salon rollout
• Opened 50 new vet practices, 39 in-store
and 11 standalone
• Total vet practice portfolio of 388 practices
• 59% of stores have a vet practice
• Opened 60 new grooming salons
• Total portfolio of 240 grooming salons
• 56% of stores have a grooming salon
Adjacent veterinary market growth
• Acquired two specialist referral centres
Target UK portfolio is 500 Pets at Home
superstores. We will continue to open new stores
in optimal locations that are not currently served
by Pets at Home.
Trialling new formats:
Barkers, our dog focused, premium High Street
store, and Whiskers’ n Paws, a smaller
convenience store targeted at the core Pets
at Home customer.
Target UK portfolio of 700 vet practices, comprised
of 450 in-stores and 250 standalones.
Target UK portfolio of 350 grooming salons.
We aim to open every new store with both a vet
and grooming salon and retrofit services back
into the existing estate.
Expand further in the specialist referrals space
and in areas complimentary to our first opinion
practices.
Since the financial year end we have acquired two
further veterinary specialist referral centres.
Relevant KPIs
20
new Pets at Home superstores (net)
50
new vet practices
60
new grooming salons
KPIs on page 26
Key risks associated
• Brand and reputation
• Competition
• Our people
• Store and services expansion
• Liquidity and credit risk
Risk management on page 38
All 2016 financials refer to the 52 week proforma period
to 24 March 2016.
Pets at Home Group Plc
Annual Report and Accounts 2016
23
Strategic reportOverview / Strategy / Performance
Strategy in action
Grow margins
We are the pet experts, with the
widest product range, vets and
groomers, all under one roof.
What we did in 2016
Future plans
Continue to rollout new vet practices and
grooming salons, which generate a higher
operating margin than the Group. As these
pet services mature, margin leverage translates
into support for Group profitability.
Generate the right balance between high margin
and lower margin products by maintaining the
participation of own brands and private labels,
with a focus on Advanced Nutrition food. Our
flagship brand, Wainwright’s Advanced Nutrition,
provides an opportunity to enhance both
revenues and margins.
Build closer relationships with suppliers and
improve contractual terms, improve product
quality and access innovative new products.
Continue to leverage our dedicated sourcing
office in Hong Kong, Pets at Home Asia, to
develop relationships with existing and new
suppliers overseas.
Improve buying terms by driving economies
through increased quantities, providing financial
support for TV and marketing campaigns and
negotiating on working capital terms.
Key risks associated
• Brand and reputation
• Competition
• Supply chain/sourcing
• Treasury and financial risk
• Store and services expansion
• Regulatory and compliance
Risk management on page 38
Services
• Services gross margin expanded by 35 bps
to reach 33.0%
• Services revenues grew to 10.5% of Group
revenue, compared with 8.6% in the prior year
• Fee income from Joint Venture vet practices
up 22.3% to £34.5m
Product mix and own brands
• 42% of store revenues are own brand/private
label, compared with 43% last year
• Advanced Nutrition revenues grew by 12.3%
to £163.2m
• Wainwright’s revenues grew by 17.4%
to £47.0m
Sourcing and terms
• Refreshed >1,500 own brand or private label
products during the year
• Terms and working capital efficiencies
progressing in-line with our expectations
Relevant KPIs
54.5%
Group gross margin, +31bps
57.0%
Merchandise gross margin, +79bps
33.0%
Services gross margin, +35bps
16.0%
pre-exceptional EBITDA margin, -38bps
KPIs on page 26
All 2016 financials refer to the 52 week proforma period
to 24 March 2016.
24
Pets at Home Group PlcAnnual Report and Accounts 2016 More specialist
Most loved
A responsible pet retailer
The success of our
veterinary model is
based on the talent
of our entrepreneurial
Joint Venture partners.
Huw Morgan Jones
has been a Joint
Venture Partner for
eight years and
is a partner in three
Vets4Pets practices…
“I joined the group in 2008,
investing as the sole Joint Venture
partner at the in-store practice in
Milton Keynes. Previously, I had
been practising as an employed
vet for 12 years and was looking for
the route to running my own practice
and being able to share in the
profits. The JV partnership gave me
a much simpler route to financing
the practice and comes with the
business support that I needed.
The practice at Milton Keynes has
performed very well and we have
added extra consulting rooms, theatre
and ward space over the years,
including a first floor extension which
was finished at Christmas. On my
journey, I also invested in two other
nearby practices, where I can bring my
orthopaedic expertise to the surgery.
One of the biggest benefits in
being part of a larger group is the
learnings I can gain from the other
vet partners. The JV network
provides us with opportunities to
share, as we all have an interest
in the success of the brand. Being
part of Vets4Pets also allows me
to benefit from the nationwide
advertising and the increasing brand
recognition amongst the public.
Looking forward, I still see further
opportunities. I’ll be considering a
move to extended hours, or even
24/7 at the Milton Keynes practice
in the future, which will bring even
more convenience to my clients and
their pets.”
Strategic link:
By working in partnership with our
Joint Venture veterinarians we can
develop successful practices that
grow ahead of the market.
Pets at Home Group Plc
Annual Report and Accounts 2016
25
Strategic reportOverview / Strategy / Performance Key performance indicators
Our performance is measured against KPIs
across each of our three strategic pillars
Grow like-for-like sales
2.2%
1.5%
Group like-for-like growth (%)
Merchandise like-for-like growth (%)
2013
2014
2015
2016
2.6
2.4
2.2
4.2
2013
2014
2015
2016
1.5
2.5
2.4
3.7
10.4%
Services like-for-like growth (%)
5.6
2.1
2013
2014
2015
2016
10.7
10.4
Performance in 2016
Group like-for-like growth impacted by
lower Merchandise like-for-like, where a
poor season in Health & Hygiene products
across the market offset strong growth
in the strategic contributors of Advanced
Nutrition, VIP loyalty club and omni-channel.
Increased Services like-for-like growth
was driven by the growing maturity of
our vet practices and grooming salons.
Priorities for 2017
To drive like-for-like growth ahead of the
market in both Merchandise and Services.
Key risks associated
• Brand and reputation
• Competition
• Our people
• Business systems & information
security
• Supply chain/sourcing
• Store and services expansion
• Regulatory and compliance
• Extreme weather
40%
Products refreshed or changed (%)
2013
2014
2015
2016
42
41
44
40
Performance in 2016
In line with our aim to broadly maintain
the product refreshment rate, we changed
more than 3,000 products in the year,
representing 40% of the total range.
Priorities for 2017
Maintain our rate of refreshment,
to ensure our engaged pet customers
are seeing something new and different
each time they visit.
Key risks associated
• Our people
• Supply chain/sourcing
All 2016 financials refer to the 52 weeks proforma period to 24 March 2016.
26
Pets at Home Group PlcAnnual Report and Accounts 2016 4.5m
64%
VIP club members (m)
VIP card swipe rate in-store* (%)
2013
0.5
2014
2015
2016
2.0
3.2
17
2013
2014
2015
2016
4.5
52
65
64
* swipe rate represents the final quarter
period in each year.
79%
Colleague retention (%)
2013
2014
2015
2016
83
81
81
79
Performance in 2016
In line with our aim, we broadly
maintained our colleague retention
rate, which is underpinned by the high
levels of satisfaction and engagement
colleagues have with the business.
All 2016 financials refer to the 52 weeks proforma period to 24 March 2016.
Performance in 2016
VIP club members grew by 1.3m during
the year and our database now contains
the details of over 13.5m pets. Swipe rate
of the card at tills has been maintained
and represents 64% of our store revenues.
Priorities for 2017
To enrol further new VIP club members and
continue to expand the club. As we enter
our fourth year post launch of the club,
we expect to see a modest improvement
in the swipe rate at store tills.
Growing the club membership and swipe
rate allows us to support like-for-like
sales with targeted marketing offers
to our customers.
Key risks associated
• Brand and reputation
• Our people
• Business systems and
information security
Priorities for 2017
Our aim is to maintain the colleague
retention rate, which already ranks as
leading in the industry. Alongside our
specialised Steps training programme,
this will be key to ensuring our colleagues
can deliver friendly expertise to customers
and their pets.
Key risks associated
• Brand and reputation
• Our people
• Competition
• Store and services expansion
27
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance
Key performance indicators continued
Grow space and optimise footprint
419
388
240
Pets at Home superstores
Vet practices
Grooming salons
2013
2014
2015
2016
345
377
399
419
2013
2014
2015
2016
208
277
2013
2014
2015
2016
338
388
87
129
180
240
Performance in 2016
We opened a total number of 21 new
superstores during the year, in line with
our target of 20–25, alongside the closure
of one store. We also opened new trial
formats: six Barkers and one Whiskers
‘n Paws by Pets at Home.
Priorities for 2017
We will open 15–20 new Pets At Home
superstores in the coming year, taking
us closer to our target of 500 stores
across the UK.
Performance in 2016
We opened 50 new vet practices during
the year, in line with our target of
50–55. We now have 250 in-store and
138 standalone practices, with 59%
of our stores containing a vet practice.
Priorities for 2017
We will open 45–55 new vet practices in
the coming year, taking us closer to our
target of 700 practices across the UK
and 90% of stores with a vet practice.
Key risks associated
• Store and services expansion
• Competition
• Brand and reputation
• Our people
• Liquidity and credit risk
Key risks associated
• Store and services expansion
• Competition
• Brand and reputation
• Our people
• Liquidity and credit risk
Performance in 2016
We opened 60 new salons during the
year, in line with our target of 55–60.
Priorities for 2017
We will open 55–60 new grooming
salons in the coming year, taking us
closer to our target of 350 grooming
salons in stores across the UK.
Key risks associated
• Store and services expansion
• Competition
• Brand and reputation
• Our people
• Liquidity and credit risk
All 2016 financials refer to the 52 weeks proforma period to 24 March 2016.
28
Pets at Home Group PlcAnnual Report and Accounts 2016 Grow margins
54.5%
57.0%
Group gross margin (%)
Merchandise gross margin (%)
54.1
53.8
54.2
54.5
2013
2014
2015
2016
56.0
56.1
56.3
57.0
2013
2014
2015
2016
33.0%
Services gross margin (%)
2013
2014
2015
2016
22.5
26.3
32.6
33.0
Performance in 2016
Group gross margin benefitted from
expansion in both the Merchandise
and Services businesses. Merchandise
gross margin contributors were improved
terms negotiations with suppliers,
alongside customer switching to
Advanced Nutrition foods, particularly
Wainwright’s. Services gross margin
benefitted from the growing maturity
of our vet practices.
Priorities for 2017
Looking forward, we will continue to see
support to our Group gross margin from
Advanced Nutrition growth and Services
maturity, but this is expected to be more
than offset in the current financial year
by the impact of weaker sterling.
Key risks associated
• Reputation
• Competition
• Supply chain/sourcing
• Treasury and financial risk
• Store and services expansion
16.0%
Group pre-exceptional EBITDA margin (%)
2013
2014
2015
2016
16.2
16.4
16.4
16.0
Performance in 2016
Group pre-exceptional EBITDA margin
declined versus the prior year, reflecting the
mix impact of specialist referral centres,
alongside our commitment to strategic
investment in seamless shopping and our
colleagues, despite some of the top line
challenges we saw during the year.
Priorities for 2017
The National Living Wage ("NLW") will be
incorporated into our colleague cost base
in 2017 and, as we have previously
highlighted, alongside our ongoing
investment in seamless shopping, will
cause some EBITDA margin dilution.
Whilst the progression in NLW over the
coming years is an ongoing cost pressure,
we expect the maturity profile of our Services
business to generate EBITDA margin
expansion in the medium to long term.
Key risks associated
• Reputation
• Competition
• Supply chain/sourcing
• Treasury and financial risk
• Store and services expansion
All 2016 financials refer to the 52 weeks proforma period to 24 March 2016.
29
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Finance review
Despite some seasonal challenges to our Health & Hygiene sales,
we have seen excellent performance in our strategic growth
drivers of Advanced Nutrition, vet and grooming services. Together
with refinancing benefits, this has contributed to our earnings growth
of 11.2%. Our strong cash flow has enabled us to increase the ordinary
dividend to shareholders, to a payout ratio of 50%, whilst also investing
for growth through the acquisitions of specialist referral centres.
Financial highlights
The FY16 accounting period represents the 53 week period from 27 March 2015 to 31 March 2016. The comparative FY15 period
represents the 52 week period from 28 March 2014 to 26 March 2015. Throughout the Chief Financial Officer’s review, unless otherwise
stated, FY16 commentary will refer to the unaudited 52 week period to 24 March 2016, to better reflect the underlying performance of
the business.
Revenue
Gross
margin
EBITDA
Other income
statement
Cash flow
and leverage
Food
Accessories
Total Merchandise revenue1
Services & Other revenue2
Total Group revenue
Like-for-like growth3
Merchandise LFL growth
Services LFL growth
Merchandise gross margin
Services & Other gross margin
Total gross margin
Pre-exceptional EBITDA (£m)
Pre-exceptional EBITDA margin
Pre-exceptional profit before tax (£m)
Statutory profit before tax (£m)
Pre-exceptional basic EPS (pence)
FCF (£m)
Leverage (Net Debt/EBITDA)
2016
Audited 53 weeks
to 31 March 2016
390.0
320.2
710.2
82.9
793.1
2.1%
1.4%
10.0%
57.0%
32.9%
54.5%
127.44
16.1%4
97.35
92.1
15.45
71.6
1.3x4
2016
Proforma 52 weeks
to 24 March 2016
382.5
314.0
696.5
81.3
777.8
2.2%
1.5%
10.4%
57.0%
33.0%
54.5%
124.74
16.0%4
95.35
90.2
15.15
77.8
1.2x4
2015
Audited 52 weeks
to 26 March 2015
359.3
306.8
666.1
63.0
729.1
4.2%
3.7%
10.7%
56.3%
32.6%
54.2%
119.6
16.4%
87.0
87.0
13.56
72.0
1.6x
Change
Proforma 52 weeks
to 24 March 2016
6.4%
2.4%
4.6%
29.2%
6.7%
79 bps
35 bps
31 bps
4.2%
(38) bps
9.6%
3.7%
11.2%
8.1%
(0.4)x
1 Includes Food and Accessories revenue from our store and online operations.
2 Includes veterinary Joint Venture fees and other income, Groom Room revenue, revenue from live pet sales and insurance commission.
3 ‘Like-for-Like’ sales growth comprises total sales/fee revenue in a financial period compared to revenue achieved in a prior period, post cannibalisation, for stores, online
operations, grooming salons and vet practices. “52 weeks” represents LFL sales for the 52 week period to 24 March 2016 compared with the 52 week period to 26 March
2015. “53 weeks” represents LFL sales for the 53 week period to 31 March 2016, compared with the 53 week period to 2 April 2015.
4 Excludes £0.8m of M&A related exceptional expenses.
5 Excludes £0.8m of M&A related exceptional expenses and an exceptional finance expense of £4.3m associated with the amortisation of capitalised fees from the previous
finance facility.
6 Excludes exceptional tax credit of £4.3m.
30
Pets at Home Group PlcAnnual Report and Accounts 2016 Merchandise revenue
£696.5m
+4.6%
(2015: £666.1m)
Services revenue
£81.3m
+29.2%
(2015: £63.0m)
Sales and revenue
Total revenue grew by 6.7% to £777.8m
(FY15: £729.1m), with particularly strong
performance in Services, alongside good
growth in our Food business. Like-for-like
sales grew by 2.2%, driven by strength in
Advanced Nutrition, VIP club momentum
and growth in fee income from our
veterinary practices and grooming salons.
This was partially offset by the seasonal
challenge to Health & Hygiene products,
which was a negative contributor to
like-for-like performance.
Total Merchandise revenue, which includes
Food and Accessories, grew by 4.6% to
£696.5m (FY15: £666.1m).
Food revenue grew strongly by 6.4% to
£382.5m (FY15: £359.3m), reflective of
excellent performance in dog food and
treats, and both dog and cat Advanced
Nutrition. Advanced Nutrition revenue grew
by 12.3% to £163.2m (FY15: £145.4m),
with our flagship private label Wainwright’s
a key contributor, growing by 17.4% to
£47.0m (FY15: £40.1m). Grocery dog and
cat food performance was weaker, where
we are seeing the impacts of our space
reduction and the ongoing competitive
market environment in this category.
Accessories revenue grew by 2.4% to
£314.0m (FY15: £306.8m). Revenue
growth was significantly impacted by
weakness in Health & Hygiene products,
which saw particularly strong growth in the
prior year and weather related challenges
in the current year. We also saw a weaker
performance in aquatics accessories,
reflecting our space reallocations when
we retrofit services into existing stores.
Offsetting this to some degree was good
performance in dog accessories across
toys, bedding and training, where we
have reinvigorated ranges this year.
Services revenue grew 29.2% to £81.3m
(FY15: £63.0m), increasing participation to
10.5% of Group revenue (FY15: 8.6%). This
reflects both new openings and another
year of excellent growth in our vet practices
and grooming salons. Growth in our Joint
Venture veterinary practices was strong,
generating fee income of £34.5m (FY15:
£28.2m), up 22.3% compared with the prior
year. Within our mature vet practices, revenue
continued to grow ahead of the market.
Gross margin
Group gross margin expanded by 31bps
to 54.5% (FY15: 54.2%), attributable to
significant expansion in our Merchandise
margin, as well as progression in
Services margin.
Gross margin within Merchandise was
57.0%, an expansion of 79 bps on the
prior year (FY15: 56.3%). This has primarily
been achieved through improvements in
terms with suppliers, alongside the mix
shift from grocery to Advanced Nutrition
foods, particularly the margin benefit from
our private label Wainwright’s. These
positive movements more than offset the
faster growth of food versus accessories.
Services gross margin, which was 33.0%
in FY16 (FY15: 32.6%), expanded by 35
bps through the growing maturity of our
veterinary practices. This positive benefit
was partially offset by the increasing
number of immature grooming salons
in the portfolio, our ongoing investment
in pet welfare and our acquisition of two
veterinary referral centres during the
period. The referral centres are operated
as wholly owned businesses and therefore
have lower margins than that of the Joint
Venture fee income model.
Unless otherwise stated, all 2016 financials refer to the 52 weeks proforma period to 24 March 2016.
31
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Finance review continued
Operating costs
Selling and distribution expenses of
£274.7m were broadly constant as a
percentage of Group revenue at 35.3%
(FY15: 35.4%). Occupation costs once
again declined as a percentage of revenue
as we benefit from a benign rental market
and the offset to rental costs from the
retrofitting of vet practices to stores.
Colleague costs of £156.2m (FY15:
£136.5m) increased as a result of our
new store rollout and ‘learn to earn’ Steps
training programme, alongside moving to
an improved holiday pay scheme for our
store colleagues. We also expanded our
omni-channel colleague team to deliver
the seamless shopping strategy.
Pre-exceptional administration expenses
of £50.1m were 6.4% of revenue
(FY15: 5.6%). The increase mainly reflects
investment in the systems software and
hardware to deliver our seamless strategy,
and an increase in IFRS2 share based
payment charges to £3.0m (FY15: £1.7m).
Finance expense
Pre-exceptional net finance expense
was £4.8m, a significant decline from
the prior year (FY15: £9.8m) as a result
of our refinancing in April 2015. An
exceptional non cash finance expense
of £4.3m relates to the amortisation
of capitalised fees associated with
the previous financing facility.
Taxation, trading profit & EPS
Underlying total tax expense for the period
was £19.8m, an effective rate of 21% on
pre tax profit.
Pre-exceptional trading profit for the
period was £75.5m (FY15: £67.9m) which
excludes £0.8m of M&A related exceptional
expenses, the exceptional finance expense
of £4.3m and their taxation impacts.
Pre-exceptional basic earnings per share
were 15.1 pence (FY15: 13.5 pence),
showing strong growth of 11.2%, which
reflects our operational expansion, the
positive impact of refinancing and a lower
corporation tax rate this year.
EBITDA
Pre-exceptional EBITDA of £124.7m, which
excludes £0.8m of M&A related exceptional
expenses, represented a 4.2% increase
on the previous year (FY15: £119.6m).
Working capital
The cash movement in working capital
for the 53 week period was an outflow of
£3.6m, comprised of a £3.6m increase
Capital investment
Capital investment in the 53 week
period totalled £41.5m (FY15: £33.2m).
The majority of our capital investment
relates to the rollout of new stores and
services, alongside the retrofitting of vet
and grooming practices to the existing
estate. When compared with the prior
year, we have seen greater investment
in systems to support the seamless
shopping strategy and an increase in
the number of wholly owned vet practices,
where the Group incurs the full capital
cost of build and fitout. We utilise wholly
owned vet practices as a trial for potential
new JV partners, and cycle around 50%
of those opened into Joint Venture models
during the year, recovering our initial
capital investment.
On a cash basis, capital expenditure in
the period was £36.8m (FY15: £30.4m).
Pre-exceptional EBITDA margin declined by
38 bps when compared with the prior year.
This reflects our commitment to strategic
investment in the business, despite some
of the top line challenges we saw from
the seasonally impacted Health & Hygiene
category. There was also a dilutive mix
impact from the addition of our newly
acquired speciality referral centres
during the year.
in inventory, an increase in receivables of
£6.8m, offset by an increase in trade and
other payables of £6.8m. The 53rd trading
week caused an overall adverse movement
in working capital of £8.6m, comprised
of £6.1m in trade receivables and £2.5m
in trade and other payables. We therefore
saw an underlying improvement in our
working capital position of £5.0m on a
52 week basis.
Pre-exceptional EBITDA
£124.7m
+4.2%
(2015: £119.6m)
Unless otherwise stated, all 2016 financials refer to the 52 weeks proforma period to 24 March 2016.
32
Pets at Home Group PlcAnnual Report and Accounts 2016 £m
Opening net debt
Free cashflow1
Ordinary dividends paid
Acquisitions
Other
Closing net debt
Leverage (ND/pre-exceptional EBITDA)
FY16
Proforma 52
weeks to 24
March 2016
(192.0)
77.8
(27.9)
(8.1)
(5.6)
(155.8)
1.2x
FY16
Audited 53
weeks to 31
March 2016
(192.0)
71.6
(27.9)
(8.1)
(5.6)
(162.0)
1.3x
FY15
Audited 52
weeks to 26
March 2015
(259.4)
72.0
(8.9)
–
4.3
(192.0)
1.6x
1 FCF is defined as net cash from operating activities, less net cash used in investing activities, interest paid, debt
issue costs and tax paid. FCF is stated before cash flows for exceptional costs and acquisitions of subsidiaries.
Capital structure and cash flow
Pets at Home is a growing, cash
generative business. Our leverage position
at 31 March 2016 was 1.3x net debt/
pre-exceptional EBITDA, reflecting a
reduction of 0.3x during the course of the
year, despite the £8.6m negative working
capital impact of the 53rd trading week.
We have deleveraged by 1.0x in the two
financial years since our stock market listing,
generating a total of £150m in free cashflow1,
returning £37m to shareholders in dividends
and investing £8m in bolt-on acquisitions.
Our priority is to invest in areas that will
expand the Group and deliver appropriate
returns. Since the year end, we have
acquired two veterinary specialist referral
centres for a total consideration of £14.9m
and we will continue to explore bolt-on
opportunities in the wider veterinary
services market.
Going forward, we intend to maintain
a leverage position of around 1.5x net
debt/EBITDA under normal circumstances,
moving to a maximum of around 1.75x in
the event suitable investment or acquisition
opportunities arise. We believe this
maintains appropriate flexibility for our
business, operating in a resilient market
with strong cash generation capabilities.
Dependent upon our acquisition outlook
and if we do not foresee investment
uses, it is our intention to return surplus
free cashflow to shareholders through
a combination of ordinary and special
dividends.
Dividend
The Board has recommended a final
dividend of 5.5 pence per share, giving
a total dividend of 7.5 pence per share
in respect of the 2016 financial year,
up 39% on the prior year. The Board has
increased the dividend payment policy to
around 50% of earnings, reflective of the
cash generative abilities of the business
and the positive long term growth outlook.
The final dividend will be proposed by
the Directors at the 2016 AGM and
is in addition to the interim dividend of
2.0 pence per share, paid to shareholders
on 8 January 2016. The ex-dividend date
will be 18 August 2016 and, if approved
at the Company’s forthcoming AGM,
will be paid to shareholders on 19
September 2016 to those shareholders
on the register at the close of business
on 19 August 2016.
Mark Adams
Interim Chief Financial Officer
25 May 2016
Unless otherwise stated, all 2016 financials refer to the 52 weeks proforma period to 24 March 2016.
33
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Operating review
Merchandise
Our Merchandise segment is comprised
of Food and Accessories across both our
store and online businesses.
Food
Advanced Nutrition
Grocery food
Treats
Other food
Accessories
Pet homes and habitats
Toys, collars, leads, clothing and other accessories
Health & Hygiene products
Our Merchandise brands
Merchandise revenue
Revenue split
Food
Accessories
Growth
£382.5 m
+6.4%
£314.0 m
+2.4%
Merchandise revenue
£696.5m
+4.6%
34
Food
Pet food represents the largest segment of
our Merchandise revenues. We sell food for
all major pet categories – dogs, cats, small
mammals, fish, reptiles, birds and horses.
In 2016, revenues from food were
£382.5m, representing 54.9% of total
Merchandise revenues.
Our growth in food is driven by Advanced
Nutrition, premium ranges offering
significant health and wellbeing benefits
to dogs and cats. Advanced Nutrition
revenues of £163.2m, which grew by
12.3%, accounted for 43% of our food
revenues in 2016. The health benefits of
Advanced Nutrition are best communicated
by well-trained colleagues who can discuss
the specific requirements for an individual
pet and advise customers of the most
appropriate diet. For this reason, the
distribution channels for Advanced
Nutrition are restricted to pet specialists.
Pets at Home has been responsible for
much of the growth in this segment of the
market and holds a 53% market share.
Grocery pet food, which is sold by pet
specialists and supermarkets, and pet
treats, form the other major segments
of our food offer.
Our Pets at Home brand and private labels,
such as Wainwright’s, account for 32%
of our total food revenues. Our flagship
Wainwright’s brand alone has sales of
£47m. Over the year we added unique
new ranges such as Pure, which uses
dehydration to preserve the quality of its
fresh ingredients, and Wellness, one of
the leading Advanced Nutrition ranges in
the US which is exclusive to Pets at Home
in the UK.
We continue to innovate in this growing
category and are investing in the
development of new ranges that extend
choice for customers and provide
additional opportunities for growth.
Pets at Home Group PlcAnnual Report and Accounts 2016
Accessories
Revenues in accessories, which account
for 45.1% of Merchandise revenues, grew
2.4% to £314.0 million in 2016.
Our ranges include bedding, collars
and leads, feeding bowls, clothing,
toys, grooming products, training
and behavioural products, and travel
accessories for dogs and cats in addition
to small animal homes and bedding,
equestrian accessories, and Health
and Hygiene products. In accessories,
our own brands and private labels
represent 51% of store revenues.
Progress in accessories is supported
by success in designs that mirror human
trends in home furnishings and fashion,
and over the peak Christmas trading
period, advent calendars for dogs and
cats sold well. We expect these trends
towards a ‘humanisation’ of pet
accessories to continue.
Innovation is a critical factor in our
success in both food and accessories.
We continue to invest in the development
of new and innovative products that are
both attractive and fun, and yet always
contribute positively to the welfare
of pets and represent good value for
our customers. In the past year we
refreshed 40% of our store range.
A seamless approach
Our in-store range is supported by an
expanded offer of 12,000 products
available online. We have continued to
invest in providing our customers with a
seamless approach to shopping which
allows them to engage with us where they
want, when they want and how they want.
This will be enhanced by new developments
which will allow colleagues to place orders
for customers from our extended range
while they are in store, using our Pet Pads,
and the launch of our VIP App.
Strategy in action: VIP club exclusive offers
Case study:
VIP club driving
customer purchasing
into Advanced Nutrition
Our loyalty scheme, VIP club, allows us
to engage with our customers through
exclusive offers on both products and services,
based upon our understanding of their pet
ownership and purchasing behaviour.
By communicating with our VIPs about the
benefits of better pet diets, both through
our colleagues in-store, as well as mailers
and online communications, we have
successfully increased our VIP’s participation
in Advanced Nutrition foods. Over 50% of
our longest serving VIP members purchased
Advanced Nutrition foods, compared to
40% across the whole VIP club, where many
customers have been members for only
a short period of time.
4.5m
VIP members
64%
Swipe rate of VIP card at store tills
35
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Operating review continued
Services
Our Services segment is comprised
of our vet practice, grooming salon
and insurance businesses, as well as
our pet sales.
Services & Other
First opinion veterinary practice services
Specialist referral veterinary centre services
Grooming salons
Insurance
Pets
Revenue split
Growth
Vet practice fee income
£34.5 m +22.3%
Other services
£46.8 m +34.8%
Our Services brands
Services revenue
Services revenue
£81.3m
+29.2%
36
Not only are pet services profitable in
their own right, they are an important
driver of both increased footfall and
additional merchandise sales in our
stores. They also create additional
expertise within our stores, contribute to
their appeal and enhance brand loyalty.
Veterinary practices
Pets at Home operates the largest branded
network of first opinion veterinary practices
in the UK, trading mainly under the
Vets4Pets brand name. During the year,
the Group also entered the market for
veterinary referrals with the acquisitions of
Northwest Surgeons and Anderson Moores
veterinary specialists and, since the year
end, we have acquired Eye Vet and Dick
White Referrals.
First opinion practices
Our first opinion practices represent the
only large scale joint venture veterinary
services business in the UK. Practices
operate both within our stores and in
standalone locations.
The joint venture model provides
opportunities for individual vets to own their
own practice together with Pets at Home.
Each joint venture is constituted as an
independent business which is funded by
small loans into the new business from the
vet and from Pets at Home, and a larger
independent bank loan, which together
provide for the fit out of the practice and
the initial working capital requirements.
Pets at Home receives a percentage of
fee income from the JV in return for the
administrative and back-office services we
provide. If the practice is located in one of
our stores a service charge is also levied
on the practice, reflecting the space it
occupies. The JV partner has access to
all the profits in the business once the
loans are repaid, and is entitled to the
increase in value on the business if it is
sold to a new JV partner.
Pets at Home Group PlcAnnual Report and Accounts 2016
We also operate a number of practices
that are wholly owned by Pets at Home
which provide vets with opportunities to
trial working with us before committing
to a JV partnership.
Veterinary referral centres
Based on the success of our JV model in
first opinion practices, we have developed
a shared ownership model for our
veterinary referral centres. This allows
Directors to remain with a significant
interest in the business, it provides support
for future growth and development, and
creates a platform for new clinicians to
become business partners in the future.
Looking forward, we see further opportunities
to grow our business in veterinary referrals
through organic growth, bolt-on acquisitions
and we will continue to explore additional
products and services for clients of our
first opinion practices, including extended
opening hours and the development of
innovative care packages.
Grooming salons
In a highly fragmented UK market we provide
grooming services under two brands; The
Groom Room, which is the largest branded
chain of pet grooming salons in the UK;
and within our Barkers premium dog stores
where the spa and bath house is a major
element of the total offer.
Groom Room salons are primarily located
within our stores, with a small number being
trialled alongside standalone vet practices.
Colleagues working in our salons receive
extensive training and education which takes
more than 1,400 hours to complete. Our highly
skilled stylists provide grooming services
for dogs and cats including bathing, clipping,
coat cutting and nail trimming.
Pet insurance in our stores
We offer Pets at Home branded insurance
in our stores and online, which provides
cover for dogs, cats and rabbits. We
operate on an introducer basis, with the
insurance product issued and underwritten
by a third party.
Strategy in action: Increasing customer footfall
Case study:
Adding vet practices
and grooming salons
to our stores increases
overall profitability
Adding veterinary practice and grooming salon
services to our stores creates the ultimate pet
shopping experience for our customers, all
under one roof. Services create more reasons
for pet owners to shop with us and increase
footfall and customer loyalty.
In addition to increasing customer footfall and
loyalty, services generate additional revenue
and profit streams for the business, providing
margin support to the Group.
In a fully mature store with vet and groomer,
the operating profitability is 24% higher than
that of a store alone, which reflects the
additional profit streams of those businesses,
operating at a higher margin to the store, as
well as the service charge paid by the veterinary
practice for the space occupied in-store.
Our overall estate is still very immature, with only
20% of our vet practices and 15% of our grooming
salons having reached maturity. Opening more
vet practices and grooming salons, alongside our
services maturing, brings margin support to our
business over the longer term.
59%
of stores have a vet practice
56%
of stores have a grooming salon
37
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Risk management
An effective risk management process has been
adopted to help the Group achieve its strategic
objectives and enjoy long term success.
Like all businesses, we face
risks and uncertainties that
could impact the achievement
of our strategy. These risks are
accepted as part of doing
business. The Board recognises
that the nature and scope of
these risks can change and so
regularly reviews them as well
as the systems and processes
to mitigate them.
Our risk management process
1
Key risks by
area (and any
changes since
the last review)
5
This process is then
reviewed/monitored and
reported to the Board and
Audit & Risk Committee
twice a year
2
Risk ratings
– by evaluating
each risk and
assigning a score
The Board and the Executive
Management Team are collectively
responsible for managing risk
across the Group. On a department
by department basis, risks are
reviewed regularly and risk
registers are updated at least three
times a year. The teams meet to
discuss and agree:
4
Progress in executing
agreed process
improvement and
implementing agreed
risk mitigation
3
Identifying the
required actions
against each risk
Principal risk rating matrix
Top principal risks
1. Brand and reputation
2. Competition
3. Stores and service expansion
4. Our people
5. Business systems and information security
6. Supply chain/sourcing
7. Liquidity and credit risk
8. Treasury and financial risk
9. Regulatory and compliance
10. Extreme weather
38
IMPACTPROBABILITYRAREALMOST CERTAINLOWHIGH42351897106Pets at Home Group PlcAnnual Report and Accounts 2016 Risk management
responsibilities are
allocated as follows:
Health and Safety
Committee
Assists the Board in
managing the risk of health,
safety and security
Holds meetings
quarterly with
stakeholders from
across the Group.
Reviews the Group’s
risk register, health
and safety policy and
compliance with
applicable regulations.
Recommends to the
Board and Group
appropriate policies
and procedures.
Updates the Board
on accidents across
the Group.
Audit & Risk Committee
Oversees the risk
management process
on behalf of the Board
Internal Audit
Co-ordinates the risk
management process
Receives and reviews
detailed risk reports
prepared on a department
by department basis
(twice a year).
Chairman, together
with the committee,
completes a detailed
review of the risk reports.
Conducts regular deep
dives into key risk areas
with relevant Executive
Board members to
understand the nature
of the risks and adequacy
of the mitigations and
controls that are in place.
Operating Board
Has line responsibility
for managing risks within
their areas
Reviews risk
registers periodically
(three times a year).
Takes action,
as agreed and
documented in
the risk registers.
Identifies new
risks for inclusion
in the registers.
Holds meetings with
all Risk Owners
across the business
three times a year.
Updates the individual
risk registers,
including actions
and progress made,
assesses risk ratings
and determines if
these should change
(up or down) and
documents the
controls in place
that help mitigate
each risk.
39
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance
Risks and uncertainties
Key risk
Brand and
reputation
Description and impact
The Group places pet welfare as its
highest priority and its number one
value, Pets Before Profit, reflects this.
It also recognises the need to protect
its brand and reputation. Failure to
do so could result in a loss of trust
and confidence by both customers
and colleagues.
Mitigation
As a retailer of small pets across a large number of stores, the highest possible welfare
standards must be maintained at all times and we have rigorous processes in place to
ensure this. This also extends into the supply chain with our pet suppliers. We operate
a comprehensive pet welfare audit process, utilising internal and external resources,
where all stores receive unannounced visits on a regular basis. This helps ensure our
high standards are maintained across the chain. With our suppliers, we expect the
same high standards of welfare and all suppliers are visited regularly by vets, third party
assessors, our field pet team and an animal welfare organisation and are assessed
against a comprehensive set of welfare and standards criteria. As an example of our
prioritising of pet welfare, during Easter 2016 we temporarily halted the sale of rabbits
in response to concerns over the welfare of rabbits bought at Easter.
The Group also deals with customers’ pets on a daily basis through its veterinary
practices, grooming salons and Support Adoption centres, with a consequent risk of the
death or injury of pets whilst in our care. We have a clear set of operational protocols,
with the veterinary practices subject to the professional standards mandated by the
Royal College of Veterinary Surgeons. We also have highly visible field operations teams
in respect of in-store pets, grooming and veterinary surgeries. Each area has specific
colleagues focused on ensuring the highest pet welfare standards are maintained.
We operate a confidential ‘Pet Promise Line’ where colleagues are able to raise
concerns about pet care directly with our Head of Pets. Any calls to this line result
in appropriate action to address the concerns raised.
Pet welfare across the Group is overseen by the ‘Pets Before Profit’ Board
committee. This meets regularly to review pet welfare and check that appropriate
processes are in place to ensure we maintain our high welfare standards.
Outlook
As we continue to increase our size and scale, we must work to ensure that pet
welfare standards continue to be maintained at a high level across the Group.
We will continue to monitor welfare standards closely and take appropriate steps
where required to maintain them.
Strategic priorities
• Grow like-for-like
• Grow space and optimise footprint
• Grow margins
Change:
Competition
Description and impact
The Group competes with a wide variety
of retailers and vet practices, including
other pet specialists, supermarkets and
discounters. Online competition is also
a risk, as large, well-known internet
businesses expand into pet products
and the established pet product sites
improve and expand their offer.
Failure to keep abreast of, and respond
to, developments by our competition in
the areas of price, range, quality and
service could have an adverse impact
on the Group’s financial performance
and impact opportunities for growth.
Mitigation
We continue to evolve our proposition through the ongoing addition of vets and
groomers into our existing store estate whilst continuing to innovate with the regular
introduction of new and exclusive products into our food and accessory ranges. We
continue to open new stores, vet practices and grooming salons and other trial formats.
As a specialist retailer, the delivery of friendly expertise through our highly engaged/
trained store colleagues is a key element of our proposition and we continue to invest
to ensure our service standards, as measured by our customers through Fish4opinion,
are continually improved. Further enhancements are being made to the Pets at Home
website to ensure that it is an optimal experience for customers.
The VIP club was launched in November 2012 and has been very successful –
attracting 4.5m members at financial year-end. This customer and pet database
enables more targeted marketing, which helps drive up basket values and enables
us to build a stronger sense of engagement with our customers and their pets.
In February 2016, we launched Brand Match where customers are able to check
the prices of their branded purchases from Pets at Home against Tesco.com and
Jollyes.com. If the customer’s shopping would have been cheaper at Tesco.com
or Jollyes.com, a money back voucher is issued. This helps to give customers the
confidence that, as well as choosing the best store to shop for their Very Important
Pets they can now be assured that they do not need to look around to make sure
they are paying the best prices.
Beyond Brand Match, we track and respond to competitor pricing movements where
appropriate. Continuous market research is carried out to review the pet market both
at home and abroad and understand what our competitors are doing worldwide. This
helps identify further changes/initiatives that need to be implemented to help keep
Pets at Home ahead of the competition here in the UK and remain a leader in the
market.
Outlook
Vacancy levels for existing store space have decreased leading to more competition
for physical store space. There has been some increase in the number of pure play
online competitors but this is not expected to have a significant impact on our
business. Competitor pricing strategies could become more competitive.
Strategic priorities
• Grow like-for-like
• Grow space and optimise footprint
• Grow margins
Change:
40
Pets at Home Group PlcAnnual Report and Accounts 2016 Key risk
Stores
and services
expansion
Description and impact
A key part of the Group’s growth strategy
is to increase the number of stores and to
grow its in-store and standalone veterinary
practices and grooming salons.
If we are unable to deliver the number of
sites necessary to fulfil the stores and
services expansion laid out in our strategy
and maintain our existing numbers of
sites, our expected financial performance
could be adversely impacted.
Mitigation
To open a new store successfully, we have to, in the first instance, identify an
appropriate location with a store size appropriate to the local market and with
lease terms that are acceptable. We have the ability, with smaller footprint
stores, to utilise mezzanine space to deploy Vet and Groom Room offerings,
maximising the opportunity to open the majority of stores with a full service
proposition. Any proposed new store investment has to deliver an appropriate
financial return after taking into account any financial impact on the existing
store portfolio. These processes are equally applicable when the Group looks
to open a Barkers for Dogs store or a standalone veterinary practice. However,
in common with our in-store veterinary practice-opening programme, we also
need to recruit a joint venture veterinary partner with the ability to fund their
investment into the joint venture and with the ability to provide the personal
guarantee to the bank providing the third party financing to the joint venture
veterinary practice.
The business maintains new store and new joint venture partner pipelines,
which identify potential locations and potential partners at each stage of
our process. This enables the Board to monitor progress in delivering the
expected number of new stores, veterinary practices and groom rooms.
Certain geographical areas (for example, within the M25) represent a particular
risk as suitable space for new stores, Groom Rooms, vet practices and Barkers
for Dogs is limited and existing sites may be redeveloped. Where existing sites
are at risk of redevelopment or where leases may not be renewed, specific
measures are taken to maximise the opportunity for the Group including
considering purchasing the freehold if appropriate.
Outlook
An increased proportion of our new stores will be located on newly developed
retail parks and park extensions. Whilst this can create greater timing uncertainties,
we do not expect any challenges in the short term. However, new developments
are very much dependent on tenant demand and the overall economy.
Strategic priorities
• Grow like-for-like
• Grow space and optimise footprint
• Grow margins
Change:
Our people
Description and impact
As a specialist retailer, retaining highly
trained and engaged colleagues is
fundamental to our continued success
and the delivery of our future growth.
A significant number of colleagues in
certain areas of our business are EU
nationals. If the referendum in June 2016
results in a vote to leave the EU, then
retention and further recruitment of EU
nationals may be at risk.
If we do not retain and train our colleagues,
it is unlikely that we will be able to deliver
outstanding customer service, which is a
key element of our proposition.
Our growth plans and future success are
at risk if we do not recruit and retain high
calibre, talented senior management.
Mitigation
We continue to invest in training to broaden the skill base of colleagues
across the business. We also closely monitor colleague retention rates and
engagement, the latter through our annual ‘We’re All Ears’ engagement survey
which is followed up by ‘We’re All Action’ to ensure the business responds
appropriately to opportunities for improvement raised by colleagues. We also
have a rolling programme of listening groups across the business to ensure
we are addressing issues on an ongoing basis and we are participating in the
‘Great Place to Work’ programme.
Our Remuneration Policy, as set out on pages 97 to 107, is designed to ensure
executives of the necessary calibre are attracted and retained and that through
our Long term Incentive Plans and Company Share Option Plan, colleagues
across the business can share in our success. Similarly, we continually review
the remuneration and benefits packages available to all colleagues to ensure
our colleagues are appropriately rewarded for the substantial contribution they
make to our growth and success. Succession plans are in place for key roles
and the Board and senior management regularly review these.
Outlook
The outcome of the EU referendum in June may have an impact on our
employment of EU nationals. We need to ensure that the Group continues to be
an attractive place to work, particularly if employment levels continue to increase
nationally and there is more competition in the job market.
Strategic priorities
• Grow like-for-like
• Grow space and optimise footprint
Change:
41
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Risks and uncertainties continued
Key risk
Business systems
and information
security
Description and impact
We are aware of the need to keep
core business systems up to date,
with the capability to support the Group’s
growth plans.
If our investments in both systems and
infrastructure do not keep pace with
the growth of the business there may
be a consequent limitation to our ability
to trade and expand. In addition, the
scale of system and infrastructure
change is currently significant and
this may affect our ability to deliver
IT services to the business.
We hold a significant amount of
customer data and recognise the need
to keep this secure. Any information
security breach could adversely affect
our reputation and the take up of our
customer loyalty scheme.
Mitigation
In recent years, we have made significant upgrades to our business critical
systems including the implementation of SAP Financials and HR along with SAP
HANA and BPC.
Our warehouse management system has been replaced with JDA and core
enterprise applications have been upgraded as well as the main retail website.
We continue to monitor the level of activity within the Business Systems function
and will respond appropriately should IT project or service delivery be at risk.
Disaster recovery is a key part of our systems strategy, enabling us to continue to
trade in the event of a system outage. Disaster recovery plans have been reviewed
and updated and a schedule for regular testing is now in place. The business also
undertakes regular system penetration testing.
An information security project is ongoing to ensure that we have a good
understanding of information security threats and that we have appropriate
measures in place to mitigate the associated risks. Our customer loyalty scheme
data is held by a specialist third party who has industry standard information
security accreditations and is regularly audited. Encryption is used to protect
the transmission of customer data.
Outlook
Our systems stability and reliability will continue to improve as upgrades and
enhancements are implemented and new systems are adopted.
Information security risks are likely to continue to increase. We monitor this risk
and will strengthen our controls as required.
Strategic priorities
• Grow like-for-like
Change:
Mitigation
Having Pets at Home colleagues on the ground working collaboratively with suppliers
enables us to monitor closely compliance with the Group’s Code of Ethics and
Business Conduct policy, as well as compliance with our Supplier Quality Manual.
In addition, an independent third party undertakes unannounced visits to further
monitor compliance with Group policies. During the year we have undertaken a Group
wide risk assessment to highlight any areas where we may be vulnerable to the risk
of modern slavery and will strengthen our processes in the areas highlighted.
Exposure to foreign currency movements is partially mitigated through our hedging
strategy. More detail on this can be found on page 146.
Business continuity plans are in place for the Distribution Centres and plans are
in place to mitigate the impact of any disaster by servicing all stores from a single
distribution centre.
Supply chain/
sourcing
Description and impact
During the financial year, approximately
18% of the Group’s merchandise cost
of goods was globally sourced, and
therefore we are exposed to the risks
associated with international trade,
such as inflation, changing regulatory
frameworks and currency exposure.
We are also exposed to the risks
associated with the quality and safety
of products produced globally on behalf
of the Group, many of which are own
branded or exclusive private labels.
A failure to manage this risk adequately
could lead to reputational damage,
reflected in a lack of confidence by
customers and colleagues in the
Group brands.
We have two national Distribution
Centres covering the north and south
of the UK respectively. A disaster at one
of the DCs may result in a significant
interruption to the supply of stock for
a large number of stores and in the
fulfilment of internet orders.
Outlook
We continue to develop our quality assurance processes and to ensure the
effectiveness of our Far East sourcing office in mitigating our sourcing risks
in the region.
Strategic priorities
• Grow like-for-like
• Grow margins
Change:
42
Pets at Home Group PlcAnnual Report and Accounts 2016 Key risk
Liquidity and
credit risk
Treasury and
financial risk
Description and impact
The business requires adequate cash
resources to enable it to fund its growth
plans through its capital projects and/
or an expansion of the Group’s working
capital requirement.
Without adequate cash resources, the
Group may be unable to deliver its
growth plans, with a consequent impact
on future financial performance.
Mitigation
The Group’s finances are continually monitored in the context of its growth plans and a
re-financing arrangement was made during the year. As a result, the Group is confident
that it has adequate revolving facilities in place, with a broad syndicate of ten banks.
The Group’s growth plans in respect of joint venture veterinary practices is predicated
on the availability of finance for new joint venture veterinary partners to fund both the
capital cost and working capital requirement for each new practice opening. The Group
has two revolving and two non-revolving facilities in place with major high street lenders
that give us confidence that our medium-term joint venture partner growth plans are
financed adequately.
The Group ensures that all cash surpluses are invested with banks that have credit
ratings and investment criteria that meet the requirements set out in the Group
Treasury policy, which has been approved by the Board.
The Group’s key suppliers are exposed to credit risk and, as part of the Group’s overall
risk management programme, the business has identified alternative suppliers where
appropriate and developed contingency plans, particularly in respect of own label and
private label food products.
Outlook
We will continue to monitor our finances and build relationships with our finance
providers. We do not anticipate any significant macroeconomic changes in the short
to medium term that may affect this risk area although the outcome of the EU
referendum may have some bearing.
Strategic priorities
• Grow space and optimise footprint
Change:
Description and impact
The Group has an exposure to exchange
rate risk in respect of the US dollar which
is the principal purchase currency for
goods sourced from the Far East. The EU
referendum in June has increased currency
pressures and, dependent upon the
outcome of the referendum, we may see
this continue for some time. The Group
also faces risks from changes to interest
rates and compliance with taxation
legislation. If we do not adequately
manage this exposure there could be
an impact on the Group’s financial
performance with a consequential impact
on operational and growth plans.
Mitigation
This exposure to FX fluctuation is managed via forward foreign currency contracts
that are designated as cash flow hedges. The Group has borrowings with floating
interest rates linked to LIBOR, thereby exposing the Group to fluctuations in LIBOR
and the consequent impact on interest cost. To manage this risk the Group has
interest rate swaps in place that fix the interest rate on a significant proportion
of the Group borrowings. Further details can be found on page 147.
All hedging activity is undertaken by the Group Treasury function in accordance
with the Group Treasury policy which sets out the criteria for counterparties with
whom the Group can transact and clearly states that all hedging activities are
undertaken in the context of known and forecast cashflows, with speculative
transactions specifically prohibited. Dedicated tax resource is in place and
specialist tax advisors are retained to assist in this area.
Outlook
Ongoing currency movements between the US dollar and GBP may result in further
exchange risk, particularly in light of the forthcoming referendum. We will continue
to monitor this and adjust our approach to hedging where necessary.
Strategic priorities
• Grow margin
Change:
Regulatory and
Compliance
Description and impact
Many of the Group’s activities are
regulated by legislation and standards
including, but not limited to, trading,
advertising, product quality, health and
safety, pet shop licensing, carbon emission
reporting, bribery act and data protection.
Failure to comply with these may result
in financial or reputational damage.
Mitigation
We actively monitor compliance with our existing obligations and we have internal
policies and standards to ensure compliance where appropriate. We also provide
training for colleagues where required and operate a confidential hotline for
colleagues to raise concerns in confidence.
Our suppliers commit to adhering to relevant regulations and standards as outlined
in our Quality Manual. We carry out a rolling programme of supplier audits to check
for compliance with our requirements.
Outlook
We welcome the Government’s recent animal establishments licensing consultation
and the proposed improvements to the pet shop licensing regime. We continue to
monitor this and other regulatory developments such as the new European Data
Protection regulations and to plan accordingly.
Strategic priorities
• Grow like-for-like
Change:
Extreme Weather
Description and impact
Prolonged extreme or unseasonal
weather conditions may reduce footfall
in our stores, resulting in weak sales,
leading to adverse impacts on profit
and inventory.
Mitigation
We actively monitor and forecast demand and, should this risk occur, we would
review planned and tactical promotional activity to determine whether strengthening
this would drive sales.
Outlook
Further improvements to our omni-channel offering will continue to improve our
resilience to reduced store footfall during periods of extreme weather.
Strategic priorities
• Grow like-for-like
Change:
43
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Corporate Social Responsibility
Responsible retailing
is at the heart
of our business
Our vision
Our vision is “to be the best pet
shop in the world” and we use our
“Green Paws” PawPrint to highlight
the four pillars of our strategy
which will help us to achieve this.
Heart of the
Community
Our Pets
People
“To be the best pet
shop in the world”
Sourcing with
Integrity
Our Pets
Environment
44
Pets at Home Group Plc
Annual Report and Accounts 2016
Green Pawspeople • pet • planetResponsible Retailing Behaving responsibly is
integral to how our business
operates and fundamental to
delivering across our PawPrint.
Board
of Directors
Strategic direction,
objectives &
Group targets
CSR Board
Committee
Pets
Before Profit
Committee
Strategy, detailed
targets and
implementation
CSR
Operations
Board
Overview
Responsible retailing is at the heart of
our business. Living our values to the full
provides our customers with the consistent
experience they expect from us whether
they visit our stores, transact online,
or engage the services of our vets or
groomers. It is our values that drive us
to provide ever higher standards of pet
welfare and inspire our colleagues to help
support local animal charities. And, of
course, our values underpin our business
model and the investment case we present
to shareholders.
This year has seen us make further
progress. Our governance structure is now
well established and ensures that our
Corporate Social Responsibility objectives
are aligned with and supportive of our
broader business strategy.
Over the course of the year:
• We maintained our excellent record
of colleague engagement at 94%;
• Our Santa Paws campaign raised
£770,000 to provide meals for pets
in rescue centres over Christmas;
• Over the Easter weekend we suspended
the sale of rabbits to lessen the
pressure for impulse purchases; and
• We are on track to achieve our target
of zero waste to landfill.
We are proud of these achievements, but
with “we get better every day” as one of our
values we recognise there is still further to
go. We look forward to reporting progress
in the years ahead.
Tessa Green
Chairman of the Corporate Social
Responsibility Committee and
Pets Before Profit Committee
25 May 2016
Visualising our CSR strategy:
Our CSR strategy has been developed over time, with its key objectives driven by the feedback we have
received from a wide range of stakeholders, as well as aligning with our broader business objectives.
Our pillars
Our Pets People
Heart of the Community
Sourcing with Integrity
Our Pets Environment
Our vision
To be a great place
to work
Being at the heart of
every community
Always putting Pets
Before Profit
Respecting and using
resources efficiently
Our objectives
• Exceptional colleague
• Leading the way in responsible
• Driving standards in
• Eliminating waste sent
engagement
pet ownership
the pet industry
to landfill
Progress
• World class training
• Keeping Our Pets People
healthy and safe
• Colleague engagement
maintained; improved
ranking in Great Place
to Work survey
• Steps 1 and 2 training
received external
accreditation
• Colleague and customer
accident rates reduced
• Rehoming pets in need
• Promoting the highest
of new families
• Providing lifelines to local and
national charitable causes
possible animal welfare
standards
• Online booking platform
• All suppliers confirmed in
introduced for My Pet Pals pet
care workshops
compliance with our animal
testing policy
• In-store rehoming centres provide
safe haven for small animals
until new homes can be found
• VIP loyalty scheme provides
‘lifelines’ from every purchase
• Pet food with rabbit ingredient
phased out on welfare
grounds; replaced with more
sustainable alternatives
• Pet care leaflets updated
in conjunction with RSPCA
• Gold standard incorporated
into quarterly store pet audits
• Using less energy
• Rethinking our packaging
• Becoming more fuel efficient
• Retendered waste contract
to achieve goal in year 1
• Successful pilot to reduce
energy being rolled out to
all stores
• Single-use carrier bags
upgraded and now
manufactured in the UK
• Ongoing fleet upgrades to
Euro 6 emissions standards
45
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Corporate Social Responsibility continued
Stakeholder engagement
Over the past year we have consulted widely to ensure that our programme for CSR is
not only integrated within our business objectives but is also relevant to our stakeholders.
This has helped confirm our priorities and the allocation of resources to ensure that
our activity is focused on areas where we can achieve the greatest impact socially,
environmentally and financially.
Customers
Colleagues
Environmental materiality assessment
Shareholders
Packaging
Waste
Electricity
Suppliers
l
s
r
e
d
o
h
e
k
a
t
s
o
t
e
c
n
a
t
r
o
p
m
I
Water
Diesel
Bio-
diversity
Gas
Importance to the business
operation that have the most significant
impact on the environment and to assess
how they are likely to change in the years
ahead. The results of this analysis will help
direct our actions to mitigate these impacts
and reduce our costs.
Over the year, and following the
appointment of a specialist Energy
Manager, we have made good progress
in the areas we prioritised – energy
consumption, waste management
and packaging and transport.
In this report we present the progress we
have made against the objectives set last
year and the targets we have set to make
further progress in the years ahead.
In addition to maintaining a regular
communication with our customers
through MyVIP magazine and newsletters,
this year we undertook a representative
survey of customers from our VIP club
database to gauge their views. When
asked what CSR meant to them, ‘ethics,
honesty and responsibility’ was chosen by
52% of respondents, followed by ‘giving
back to society and helping people’, which
was chosen by 38% of respondents.
When asked to rank the most important
issues for a pet retailer, pet welfare and
ethical sourcing overwhelmingly came
out top, chosen by 83% and 64%
of respondents respectively.
Given the importance of pet welfare, it
was pleasing that customers were most
aware of the donations we make to pet
rescue centres and the care we take
of the pets in our stores.
We also conducted a formal environmental
materiality assessment with stakeholders.
Through the feedback we obtained from
investors, management and our store
colleagues, we have been able to identify,
understand and quantify the areas of our
46
Regular surveys of our
4.5m VIP club members
Annual ‘We’re All
Ears’ opinion survey.
Regular meetings and
informal engagement
to gather views
Regular engagement
with major shareholders,
including active membership
of KKR Green Portfolio
Programme
Regular conferences
and dialogue with UK
and Asia suppliers
Animal welfare
organisations
Collaboration and dialogue
on issues that are
important to them and us
Policy makers
Developing dialogue with
organisations involved
in the administration
of public policy
What does CSR mean to you?
52%
38%
Ethics, honesty
and responsibility
Giving back to society,
helping people
What are the CSR issues most important
to a pet retailer?
83%
64%
Responsible
pet welfare
Ethical sourcing policy
(pets and products)
Awareness of CSR initiatives
5 point scale – totally unaware to fully aware
3.71
3.36
0
1
2
3
4
5
Charitable donations
to pet rescue centres
Pet care within
our stores
Representative sample of 1,038 VIP members
surveyed, September 2015.
Pets at Home Group PlcAnnual Report and Accounts 2016
Our Pets People
Our commitment
At Pets at Home, the role that highly trained and engaged colleagues
play is fundamental to becoming ‘the best pet shop in the world’.
Exceptional
colleague
engagement
2016 Targets & objectives
Maintain colleague engagement
at 94% and increase ‘strongly
agree’ measure to 80%.
Maintain top 20 place in Great
Place to Work survey.
World-class
training
Steps 1 and 2 to achieve
external accreditation.
2016 Achievements
Colleague engagement
maintained at 94%.
‘Strongly agree’ measure
maintained at 77%.
Improved to 7th place overall,
the highest ranked retailer.
Steps 1 and 2 training
programme endorsed by
City & Guilds.
Every Groom Room to
have a Level 3 City & Guilds
certified colleague.
44 completed; 128 studying this
year-long programme.
Keeping our
Pets People
healthy and safe
Reduce number of accidents by
5% to below eight accidents per
1,000 colleagues.
Achieved 8% reduction in
colleague accident rates –
now 7.48 per 1,000 colleagues.
Achieve distinction in the British
Safety Council’s International
Safety Awards.
Both Distribution Centres
awarded merit for second
successive year.
2017 Targets
Maintain colleague
engagement at 94% and
increase ‘strongly agree’
measure to 80%.
Maintain top 10 place in
Great Place to Work survey.
Re-launch and re-brand
Steps 1 to 3.
Make Steps 1 and 2 available
online. Develop integrated
approach for Step 3.
Every Groom Room to have
a Level 3 City & Guilds
certified colleague.
Recruit and train 100
Grooming apprentices.
Achieve a 5% reduction in
colleague accident rates
per 1,000 colleagues and
a reduction in RIDDOR
reportable accidents.
Re-apply for the Safety awards
and aim to achieve a distinction
for both centres.
Exceptional colleague
engagement
94%
colleague engagement
In April 2016 we celebrated 25 years since
the Company was founded and our first
store opened in Chester. Over that time we
have expanded our business significantly
but we have stayed true to our core values
and we celebrated this milestone with our
colleagues. We also celebrate key moments
in the careers of individual colleagues.
Being a specialist retailer the expertise that
our colleagues accumulate over time and
share with our customers is a significant
factor in our success. Even before they
start with Pets at Home, every new store
colleague is provided with a log-in to our
online welcome portal called In’duck’tion
where they are introduced to our vision and
values and get to see what life will be like
at Pets at Home. On a colleague's first day
they receive a ‘We’re glad you are joining’
card which is signed by everyone in the
team they will be working with. Our rigorous
approach to recruitment and induction
is reflected in our colleague turnover
within the first three months of only 1.9%.
New Store Managers, Support Office
colleagues, Grooming Salon Managers
and Distribution Centre Managers all
attend a WOW ("Welcome to Our World")
induction day at our Support Office. In
addition, once colleagues are with us we
continue to mark their service anniversaries,
or ‘Pets Birthdays’, for one, three, five, ten,
15 and 20 years’ service.
While we have a track record of providing
rewarding flexible working patterns for
our store colleagues, based around our
contracted minimum of 16 hours per week,
we have recognised that there is more to
be done to promote flexible working among
management categories. We have agreed
to become a launch partner with Timewise
in order to promote flexible working as
part of our management recruitment and
promotion strategies. We have changed
our approach to recruitment, succession
planning and flexible working to ensure we
attract and grow the best talent who are
able to find a career that works alongside
their home life.
We have conducted our annual employee
survey ‘We’re All Ears’ for nine years,
with questions based on our values,
vision and culture.
47
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance
Corporate Social Responsibility continued
We have maintained our excellent record of
colleague engagement; this year it was
94% and, within that, 89% of colleagues
believe ‘My work has special meaning –
this is not just a job’.
In addition to our regular internal
benchmarking exercises we have again
taken part in the external Great Places to
Work survey. This gives colleagues further
opportunities to provide feedback on what
they like about working at Pets at Home and
how we can improve. Having achieved 15th
position last year among larger companies,
we were pleased to have been ranked 7th
overall in 2016, and the highest placed
retailer. We were also shortlisted in the
Most Trusted Leadership award in the
large companies category.
World-class training
4,937
colleagues completed Steps 1 and 2 training
We believe it is essential that our
colleagues are highly trained and able
to offer the best and most up to date
advice on pet care and all aspects of pet
ownership. At the heart of this training is
our STEPS programme which has been
developed to take account of the latest
thinking, and draw on the experience and
resources of our own expert Pet Team and
internationally respected consultants.
This year our compulsory Steps 1 and 2
training programmes have been endorsed
by City & Guilds, providing a stamp of
approval that demonstrates the value
of our training to our colleagues, our
customers and other stakeholders,
including welfare organisations. We have
4,937 colleagues who had completed
their compulsory Steps 1 and 2 training
at the year end.
Having completed Step 2, colleagues
receive additional training every year to
ensure their knowledge of pet care is up
to date and we provide additional Steps
for colleagues to develop their knowledge
further. Step 3 provides more specialist
knowledge in areas, such as aquatics,
small animals, reptiles, dogs and cats.
Our Step 3 nutrition programme is also
endorsed by City & Guilds. We have 471
colleagues within the Group who have
achieved Step 3. Our ‘Learn to Earn’ model
allows colleagues to increase their hourly
rate in increments as they complete each
Step 3 specialism.
Step 4 was introduced in 2013 for
colleagues who wanted to develop their
careers but didn’t want to move into store
management. Step 4 colleagues are
experts, not only in their chosen specialist
categories, but also in how Pets at Home
manages these categories. They are
rewarded at the same level as Assistant
Store Managers and provide additional
support for new store openings in their
local area.
For colleagues who want to develop
management careers we have specific
programmes for each stage that prepare
them for their promotion. Our flagship
programme is Fast Track, a six-month
programme that provides a route to store
management. More than 50% of our store
managers are Fast Track graduates.
Having worked hard over a long period to
establish our leading level of colleague
retention we aim to maintain this in the
future. So, with the introduction of the
new National Living Wage from April 2016
we will not differentiate our rates for
colleagues under 25 and we will continue
to invest in our training and maintain the
principle of ‘Learn to Earn’.
Supporting our growth
in grooming
240
salon and spa locations
We have grown our grooming business
rapidly from 129 ‘Groom Room’ grooming
salons in 2014 to 240 salons and spas in
our stores or in standalone locations today.
Our Groom Room customers trust us to
care properly for their pets, to treat them
with respect and to return them safely.
This is a huge responsibility which is why
we invest so heavily in training for our
Groom Room colleagues and why we have
worked closely with the RSPCA to have
our procedures endorsed by them.
Training for our Groom Room colleagues
incorporates all the practical and
theoretical knowledge of the City & Guilds
level 3 diploma in dog grooming. We deliver
this training in a three step programme –
‘Prep it’, ‘Snip-it’ and ‘Clip-it’ – which takes
nine months to complete. At each step
our colleagues have to present a portfolio,
with written accounts and photographs,
of their work in the salon in addition to
practical assessments and online tests.
In total our colleagues have 1,400 hours
of formal training.
We also provide regular professional
development programmes to maintain
their knowledge and skills at a high level.
During the year we launched our Grooming
apprenticeship scheme. We currently have
14 apprentices working in our Groom
Rooms and plan to offer a further 100
apprenticeships in the current financial
year. The apprenticeship programme runs
for one year, at the end of which we hope
to offer the apprentices permanent
positions as fully trained stylists.
48
Pets at Home Group PlcAnnual Report and Accounts 2016 Power To Your Paws was fantastic. It’s the
scheme Pets at Home has for store colleagues
to learn about grooming and become a member
of the Groom Room team. I learned so much
about different coat types and different breeds
of dog, it really built my confidence.
After Power To Your Paws I became an Assistant
Stylist and followed the Groom Room’s three
step training programme – Prep it, Clip it and
Snip it – and qualified as a stylist in June 2016.
I love learning how to groom different dogs. My
favourites are the double-coated breeds like
Labradors and German Shepherds. When you’ve
removed the dead coat they look great and our
clients can really see the difference you’ve
made when their dogs have been groomed.”
Power To Your Paws
Amy Owen is a newly
qualified stylist in the
Altrincham Groom Room.
“I joined Pets at Home as a store colleague
in April 2015. I’d always had an interest in
grooming. When I was 15 I had a Saturday job
bathing dogs with an independent groomer.
When I left school I studied for a diploma in animal
management at Myerscough College in Preston.
From there I knew I wanted to work with animals
so Pets at Home was my dream job. The training
was excellent. I completed Steps 1 and 2 which
gave me the skills I needed to advise customers
about caring for their pet and the best diets to feed
them. But my ambition was always to work my way
up to grooming.
Clinical Governance Framework
Education
& Training
Risk Management
Clinical audit
Clinical
Governance
Openness
Clinical
effectiveness
Research
and Development
Supporting our vets through
Clinical Governance
Clinical Governance is a system for
improving the standard of clinical practice,
which incorporates existing activities such
as clinical audit, education and training,
research and development and risk
management. The concept of Clinical
Governance is not yet widely recognised
within the veterinary profession, which has
no equivalent of the organisational structure
that the NHS provides to medicine. So while
we rely on the professional responsibility
of the joint venture partners and their
employed vets to comply with RCVS
guidance and to practise to a high standard,
as the largest, fastest growing small animal
veterinary group in the UK, we have an
unprecedented opportunity to lead the way
in shaping the landscape of clinical practice
and to provide an environment conducive to
improving our clinical knowledge, standards
and decision making. The measures we will
adopt are based on the clinical governance
recommendations found in the RCVS Guide
to Professional Conduct.
49
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Corporate Social Responsibility continued
Accident rates – stores/practices
Distribution accident rates
0.45
0.44
0.58
0.32
2015
2016
Distribution colleague
accidents per 100,000
hours worked
2015
2016
Distribution RIDDOR
accident rates per 100,000
hours worked
11.54
8.2
7.48
1.5
1.29
1.1
2014
2016
2015
Colleague accident
rates per 1,000
colleagues
2016
2014
2015
Customer accident
rates per 100,000
transactions
Group RIDDOR rates
0.48
0.38
0.34
0.04
0.02
0.02
2016
2014
2015
Customer RIDDOR
accident rates per
100,000 transactions
2016
2014
2015
Colleague RIDDOR
accident rate per
1,000 colleagues
Causes of accidents
40%
1. Minor animal bites
2. Animal scratches/stings 6%
3. Cut or scratch due to sharp object 14%
4. Exposed to or in contact with
a harmful substance
2%
5. Fell from a height 1%
6. Hit by a moving, flying or falling object 13%
7. Hit something fixed or stationary 6%
Injured due to handling, lifting or carrying 4%
8.
Injured while using knives/
9.
hand operated equipment
10. Slipped, tripped or fell on the same level
1%
13%
1
10
9
8
7
6
5
4
3
2
Keeping our Pets People
healthy and safe
8%
reduction in the colleague accident rate
We are committed to providing a safe and
healthy environment for all our colleagues,
customers and third party contractors.
We encourage a positive health and safety
culture throughout our operations and
have robust control measures in place to
minimise the risk of incidents. The Group
Health & Safety Committee meets quarterly
and our two Distribution Centres also host
their own Health and Safety Committees,
each meeting seven times per year.
We continue to benchmark accident rates
across the Group. These include any
accidents that have taken place in our joint
venture veterinary surgeries. We report all
work related accidents in accordance with
the Reporting of Injuries, Diseases and
Dangerous Occurrence Regulations
("RIDDOR"). We also classify all incidents
where we are aware a customer intends to go
to hospital as RIDDOR reportable, which will
result in some over reporting of RIDDORs.
During the 2016 financial year, while total
accidents across the Group decreased by
1.5%, we saw a significant reduction in the
colleague accident rate from 8.17 to 7.48
accidents per 1,000 colleagues, and a
reduction in customer accidents from 1.29
to 1.10 per 100,000 transactions. The
number of RIDDOR accidents remained
similar to the previous year in our stores
and veterinary practices. In the Distribution
Centres, there was a slight decrease of
0.01 accidents per 100,000 hours worked
and a 0.26 decrease in RIDDOR accidents
in the year.
For the second consecutive year, both our
Distribution Centres received the British
Safety Council’s International Safety
Awards with Merit.
50
Pets at Home Group PlcAnnual Report and Accounts 2016
Heart of the Community
Our commitment
Being at the heart of every community is one of the core values we live by.
With 427 stores and 388 vet practices serving neighbourhoods the length
and breadth of the UK we believe that we have a responsibility to contribute
positively towards the wellbeing of our local communities.
Leading the
way on responsible
pet ownership
Rehoming pets
in need of
new families
Providing lifelines
to local and
national charities
2016 Targets & objectives
Roll out the pet workshop online
booking tool for every pet event.
Support our local communities
by providing at least 1,000 work
inspiration days.
Rehome more than 70,000
pets through in-store
rehoming centres.
Raise £1.9m in stores for
Support Adoption For Pets
with an overall fundraising
target of £3,148,950.
Donate over £1.4m worth
of VIP lifelines to charities
chosen by our customers.
Provide further £600,000
worth of Wainwright's dog
food to the Dogs Trust.
Continue to provide a charity
leave day for every colleague.
2016 Achievements
86,602 attendees at
pet workshops.
Achieved.
80,000 pets rehomed.
Colleagues raised £1.8m with
one fewer national fundraising
campaign, within which Santa
Paws alone raised £770,000.
Total raised by Support Adoption
For Pets was £3.6m.
£1.8m donated.
2017 Targets
More than 100,000
attendees at ‘My Pet Pals’
pet care workshops.
Ongoing – continue to
provide placements.
Continue to provide
opportunities to rehome
pets in 400 stores.
Stores to raise more than
last year through Santa Paws
to provide meals for pets in
rescue centres.
Donate over £2m worth
of lifelines.
We support the Dogs Trust with
food for the dogs they rehome.
This year £540,000 worth of food
was requested by the Dogs Trust.
Every colleague can take a day’s
leave for charitable work.
Continue to support the Dogs
Trust with donations of
Wainwright's dog food for the
dogs they rehome.
Ongoing.
Leading the way on
responsible pet ownership
86,602
attendees at pet workshops
Pets are our passion as well as our business.
Having worked consistently over the past
25 years, often in partnership with respected
animal welfare organisations, to raise the
standards of pet welfare in our stores, through
our supply chains and for our customers,
we have lots to be proud of. We celebrate
responsible pet ownership. We believe pets
are good for people and, in return, we go to
significant lengths to ensure that prospective
pet owners understand the responsibility
that comes with pet ownership.
Educating the next generation
of responsible pet owners
Over recent years we have established
a reputation for providing young people
from Cubs, Brownies and Beavers with
opportunities to learn more about the
responsibilities of pet ownership. Building
on the success of this approach with youth
organisations, during the year we rolled out
an online booking platform which enabled
parents to book children onto one of our
“My Pet Pals” events which we ran during
the school holidays. Over the course of the
year 86,602 people attended one of these
events to learn about what is needed to
care for small mammals, fish and reptiles.
51
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Corporate Social Responsibility continued
Over the Easter weekend alone some
2,700 young people booked to attend one
of our My Pet Pals workshops to learn more
about caring properly for pets. At the same
time, we suspended the sale of rabbits,
recognising the close association of
bunnies with Easter and the increased
pressure on parents to buy a new family
pet at this time of year.
My Pet Pals is one of a number of
education events that stores hold for
organisations in their local communities
to promote responsible pet ownership.
To recognise their commitment and reward
their achievements these events contribute
to our internal programme called ‘My Pond
League’ which aims to reward the work
colleagues do in their local community.
This reflects the importance we place
on community involvement. This year
our colleagues took the message of
responsible pet ownership to more than
450 schools, nursing homes and local
fetes and engaged with some 650 groups
of scouts, brownies and beavers.
Rehoming pets in need
of new loving homes
80,000
pets were found new loving homes through
our adoption centres
When selling a new pet we make great
efforts to find the right match between the
pet and its prospective owner and provide
it with a loving forever home. However,
owners can find that, for a variety of
reasons, they may be unable to continue
to care for their pets. This is where our
partnership with the charity Support
Adoption For Pets becomes so important.
We work closely with Support Adoption For
Pets, providing facilities and support in
stores for more than 400 pet rehoming
centres which provide a safe haven for
rabbits, guinea pigs, hamsters, gerbils, rats,
and chinchillas until a new home can be
found. Support Adoption For Pets will also
rehome rabbits that are handed to the
RSPCA if the microchip identifies the pet to
have been sold by Pets at Home. Last year
more than 80,000 pets were found new
loving homes through the adoption centres
in our stores.
Support Adoption For Pets
Support Adoption For Pets is a registered
independent charity (number 1104152)
established by the Company, which exists
to help give abandoned and homeless
small animals a second chance at
happiness. Support Adoption For Pets
is also the UK’s number one grant giving
trust to national and local animal welfare
charities and, since the charity was
established in 2006, has supported more
than 1,000 animal charities across the
country. To support this important work,
our stores and colleagues raised £1.8m
for Support Adoption For Pets which last
year made grants of approximately £2m
to charities around the UK to help them
look after the pets in their care while new
homes are found.
Selling pets responsibly
Pet ownership is a long term commitment and
before a sale takes place we first find out
about the customer to help them choose a pet
that is right for them. Colleagues are required
to follow a series of questions that are
pre-loaded into a Pet Pad, our proprietary iPad
based application, developed to standardise
and record every pet sale. These questions
are specific to the types of pet offered for sale
in our stores. We address the following areas:
• The customer and their home
– We don’t sell pets to anyone under the
age of 18
– We check that the customer is the
homeowner or has the landlord’s consent
• The suitability of the pet they wish to buy
– We discuss the life expectancy and size
of the pet when fully grown
– We discuss compatibility with children
and other pets
– We discuss dietary requirements and
how these may change over the life of
the pet
– We discuss requirements for housing,
handling and enrichment
• Transition to permanent home
– We won’t sell a pet unless the customer
confirms they are going straight home
– We don’t sell fish at the same time as
the aquarium, or reptiles at the same
time as the vivarium. We require these
to be set up and running properly in
advance of the pet being purchased
We ask every customer to sign electronically
to confirm they have been provided with
advice and a care leaflet for the pet they are
buying. Every colleague is empowered to
refuse to sell a pet if they have any doubts
about the suitability of its forever home. Only
when our colleagues are satisfied that the pet
will enjoy a happy and healthy life in its new
home will they proceed with the sale. We
apply the same principles to pets that are
adopted from the in-store adoption centres.
We aim to follow up every sale or adoption
after a few days with a call to the customer to
check all is well and provide any additional
advice that may be necessary.
52
Pets at Home Group PlcAnnual Report and Accounts 2016 Santa Paws
Christmas is a special time of year for
families – including family pets. However,
not every pet is lucky enough to spend
Christmas with a loving, caring family. For
many pets, through no fault of their own,
Christmas is spent in a rescue or rehoming
centre and it is with these pets in mind that
we developed our annual Santa Paws
campaign with Support Adoption For Pets.
The concept is very simple. Throughout
December we ask customers if they would
like to add 50p to their purchases which
we donate to Support Adoption For Pets to
buy Christmas meals for pets in rescue.
At Christmas 2014 we raised enough from
these donations to provide 880,000 meals
and set ourselves a target of 1 million
meals in 2015. Through the commitment
of our colleagues and the generosity of our
customers we beat this target substantially,
with more than 1.5 million meals donated
from the £770,000 raised.
Supporting local
and national charities
£1.78m
donated to local animal charities
Our stores and colleagues have developed
strong relationships with local animal
rescues and rehoming centres. They offer
opportunities for their charity partners to
promote their work in stores, the pets they
are seeking to rehome, and to support their
fundraising activities.
Customers too can make a huge difference
to local animal charities through our VIP
loyalty scheme which awards points to
customers for every purchase made.
These points are converted to VIP ‘lifelines’
which customers can then donate to their
local animal charities. In the past year, our
VIP members have raised £1.78m through
this scheme and supported more than
600 animal charities nationally.
Using the proceeds from carrier bag sales
On 5 October 2015 the Government
introduced a compulsory 5p charge for
single use carrier bags in England.
Companies affected by the new legislation
were required to donate the profits from this
charge to good causes. We identified Dogs
for Good and Pets As Therapy as recipients
of our donation and by the end of the year
£28,294 had been raised for each charity
from the sale of carrier bags.
Dogs for Good explores ways dogs can help
people overcome specific challenges and
enrich and improve lives and communities.
They look for sociable and confident,
well-reared puppies and train them to help
children and adults with physical disabilities
and families affected by autism, or work in
schools and residential care settings. Their
PAWS Family Dog service brings together the
parents and carers of children with autism to
explore the helping potential that a pet dog
might have within the family. The donation
from Pets at Home will help Dogs for Good
reach more families who can benefit from
having a well-trained dog in the family.
Pets As Therapy provides community
based Animal Assisted Therapy through
its volunteers who visit residential homes,
hospitals, hospices, schools, day care
centres and prisons with their own pets
to bring comfort and companionship to
individuals who appreciate having contact
with a friendly animal. However, requests
for private visits, which are often to
alleviate loneliness for elderly people or
housebound people of all ages, make up
90% of PAT’s daily enquiries but they do
not have the resources to invest in the
infrastructure to make these requests a
reality. The funding from Pets at Home will
enable Pets as Therapy to establish a 6–12
month pilot programme in 2016.
53
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Corporate Social Responsibility continued
Sourcing with Integrity
Our commitment
Pets are both our business and our passion and ‘Pets Before Profit’ has always
been our number one core value. Advocating the ethical and responsible treatment
of pets is incredibly important to us and we believe the best way to do this is to lead
by example, so we keep every aspect of our pet operations under regular scrutiny.
Driving
standards in
the pet industry
2016 Targets & objectives
Deliver the re-audit programme we have
put in place across our Asian registered
branded and PAH branded suppliers.
All UK/EU PAH branded and registered food
suppliers to be either BRC (or equivalent
quality management standard) accredited
or to have been visited by a member of the
food technical team.
Re-visit and revise our testing protocols
across all categories to ensure relevant
and up to date with the latest
developments/industry practice.
Promoting the
highest possible
animal welfare
standards
Continue to audit primary pet suppliers with
at least eight audits per annum per supplier.
Incorporate a gold standard into the
quarterly store pet audit.
Roll out new aquatics water test.
Review code of practice for pet suppliers.
2016 Achievements
Delivered as planned. Audits
extended to all suppliers
of PAH branded/private
branded products.
Achieved.
2017 Targets
Deliver all planned re-audits
and corrective action plans,
ensuring all own brand and
private branded suppliers comply
with our audit requirements.
Completed.
Agreement reached with major
US retailer on shared protocols
across a number of product
categories to enable suppliers
to reduce costs and deliver
better value.
All primary pet suppliers receive
four independent audits in
addition to four audits from
our pet supply manager.
Implemented.
Rollout new and updated
testing protocols across
our global vendor base,
in line with required legislation
as a minimum.
Develop Gold Standard pet
supplier audit with enhanced
welfare stand.
Ongoing.
Implemented and working
effectively.
Formalise overseas
and UK audits.
Code of practice reviewed
and updated.
Completed.
54
Pets at Home Group PlcAnnual Report and Accounts 2016 Driving the standards
in the pet industry
100%
of suppliers in compliance with our testing policy
Pets are our passion as well as our
business. It is the love of pets that creates
the unique bond between our business, our
colleagues and our customers, and we have
worked consistently over the past 25 years,
often in partnership with respected animal
welfare organisations, to raise the standards
of pet welfare in our stores, through our
supply chains and for our customers.
In December 2015, the Department for
Environment, Food and Rural Affairs
("DEFRA") issued a formal consultation on
its proposals to review animal establishment
licensing in England. The proposals would
update and consolidate the animal licensing
system into a single piece of legislation,
simplify the administrative process and
reflect up-to-date knowledge on animal
health and welfare. We welcome this review
and have provided a detailed response to
the consultation, supporting many of the
recommendations.
With stores around the UK, Pets at Home
deals with 300 different licensing authorities,
each with their own approach. Because we
seek the highest standards in every store,
we have instigated a number of additional
initiatives including an independent annual
audit of all our stores. Each store is audited
by SAI Global, the respected international
organisation, which also provides the Red
Tractor Farm Assurance certification scheme,
to their exacting SAI Excellence Assured Pet
Retailer Scheme standard.
If we are to sell healthy pets we believe
they must be bred responsibly so we
also undertake unannounced quarterly
inspections of all primary pet suppliers
and an annual, externally led audit is
undertaken by a consultant vet. Twice a
year we commission independent audits by
SAI Global to make sure that our suppliers
are maintaining the highest standards.
Most recently we have also introduced
an annual health audit by an RCVS Lab
Specialist Vet.
The results of these audits are carefully
monitored and acted upon by our
expert in-house pet team who ensure
procedures are followed and standards
maintained consistently across all our
stores. Our pet team can also call on the
specialist knowledge of internationally
respected consultants.
Ensuring the quality of our products
Pets at Home is the only UK pet retailer to
have a dedicated sourcing office in the Far
East. Working from our regional base in
Hong Kong, which opened in 2012, we
have a team of product technologists who
support our buyers, oversee our suppliers
and monitor production to make sure our
strict standards are met.
Our audits, which extend to all vendors
manufacturing Pets at Home branded and
private branded products, are designed to
ensure compliance with our Ethical Trading
Policy and cover labour practices and
working conditions, hours of work and
wages, on site accommodation, health
& safety, environment and supply chain
management. They are equally applicable to
home workers and subcontractors. This year
we also ensured 100% of our suppliers are
in compliance with our animal testing policy.
We have continued to work with all
suppliers to implement and improve
both quality management systems ("QMS")
and ethical and environmental ("E&E")
grading within their factories. We have
stopped sourcing from five factories who
did not want to work with us on an
improvement plan.
During the year we reached agreement with
a leading US pet retailer to collaborate in
Asia across a number of important product
categories such as collars and leads,
creating common testing protocols that
enable suppliers to reduce costs and
thereby create better value for customers.
QMS Grading – Non-food (%)
Compliant, no critical issues identified
Only minor issues to address
No outstanding issues, best in class
68%
45%
26%
29%
Non-food
2015
25%
7%
Non-food
2016
QMS Grading – Food (%)
100%
100%
Food
2015
Food
2016
E&E Grading – Non-food (%)
Compliant, no critical issues identified
Only minor issues to address
No outstanding issues, best in class
66%
44%
28%
28%
29%
Non-food
2015
5%
Non-food
2016
E&E Grading – Food (%)
100%
100%
Food
2015
Food
2016
55
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Corporate Social Responsibility continued
Promoting the highest possible
animal welfare standards
The welfare of pets is at the heart of everything
we do. We have our own dedicated team
of experts who are central to our approach.
Our Head of Pets, a Veterinary Surgeon with
over 20 years’ experience, is supported by
two qualified veterinary nurses. They are
responsible for the health and wellbeing of
our pets and we rely on their experience to
determine which pets we sell and how they
should be cared for in stores. If they have
concerns over any aspect of pet welfare they
have the autonomy to act immediately in the
interest of our pets.
Working alongside the veterinary team is
our pet operations team which is responsible
for the consistent implementation of policy
and achievement of standards in our stores.
This team is led by our Head of Pet Operations,
who is an experienced retail manager with
almost 20 years’ experience at Pets at
Home. He is supported by an aquatics
operations manager, with more than
20 years’ experience in freshwater and
marine biology, a pet and reptile operations
manager, with over 15 years’ experience in
pet and reptile welfare, and nine Field Pet
Managers, who are regionally based and
provide the vital link with individual stores
and colleagues.
56
In addition to our own experts, we take
advice from external consultants who
have dedicated their careers to and built
international reputations in animal welfare.
We believe that up-to-date information
is key to helping customers understand
what responsible pet ownership will entail
and the welfare standards they should
provide for their pets. In addition to the
training we provide for all colleagues,
who are always on hand to advise our
customers, we maintain a full range
of up-to-date care leaflets on display
permanently in our stores and via our
website. Many of these have been
produced in conjunction with the RSPCA
and are co-branded to highlight this
endorsement of the welfare standards
they promote.
Removal of rabbit from
pet food
During the year we decided to stop buying pet
food with flavour variants that include rabbit.
This was due to concerns over the conditions
in which the rabbits are kept on farms in
Europe. The rabbit used as an ingredient in
pet food comes from animals that are bred
for human consumption, and comprises the
material that is not appropriate or wanted for
human food use. Only at this point does it
become part of the pet food chain.
Whilst no rabbits are farmed exclusively for
use in pet foods, the welfare standards of the
animals being farmed for use in the human
food chain fall far short of what we would
accept for the rabbits sold as pets in our
stores. Because of this we decided that we
could not continue to buy flavour variants that
include rabbit and encouraged the branded
pet food manufacturers to follow suit.
Pets at Home Group PlcAnnual Report and Accounts 2016 Our Pets Environment
Our commitment
To deliver on our aim to minimise the environmental impact
of our operations we have plans in place to minimise our
consumption of core resources and maximise efficiency.
Eliminating waste
sent to landfill
2016 Targets & objectives
Eliminating waste sent
to landfill.
Using less
electricity
Reduce electricity consumption
per sq ft by 6% compared
to 2012 baseline.
Becoming more
fuel efficient
Achieve a 1% improvement in
km travelled per litre of diesel
across the fleet.
Reduce to 128.4 km run per
1,000 cases shipped.
Rethinking our
packaging
Continue to engage with
WRAP (Waste and Resources
Action Programme).
2016 Achievements
Retendered waste contract
and diverted 98% of waste
from landfill.
Achieved a 5.66% reduction
despite expansion of in-store
grooming and veterinary practices
which are more energy intensive
than retail.
km per litre remained broadly
level at 2.85Kpl. Driver training
continues.
Achieved 127.8 km run per
1,000 cases, a reduction
of 1% year-on-year
Developed and published
Sustainable Packaging Strategy.
Added WRAP logos to a further
100 lines.
2017 Targets
Send zero waste direct
to landfill.
Reduce electricity consumption
per sq ft by 7% compared to
2012 baseline.
Increase km travelled per litre
of diesel to 2.91kpl, a 2%
improvement.
Reduce to 126.5 km/1,000
cases shipped.
Continue working positively
with WRAP.
Eliminating waste sent to landfill
98%
of waste being diverted from landfill
zero waste to landfill within our reach in the
current financial year. Against our target
of diverting 92% of waste from our retail
operations, we achieved 97% in the
past year.
Having achieved 90% of our retail waste
being diverted from landfill a year ago, we
set a target of diverting 92% as a further
step towards our aspiration to ultimately
divert 100% of waste from landfill.
During the year our waste contract was
retendered. Following this competitive
process a new supplier has been
appointed, bringing our aspiration of
We continue to challenge the use of
packaging materials across our business
and remain committed to implement
WRAP’s OPRL recycling information
on our own brand and private brand
consumer packaging.
Following the implementation in England
of the 5p charge for single use carrier bags
on 5 October 2015 we have seen carrier
bag usage reduce by 74%.
Water
Having established a baseline for our
water consumption, we are reviewing
opportunities that will arise from the
opening up of the water market to
competition. From April 2017, we will
be able to choose who supplies our water
and wastewater retail services, giving
us an opportunity to negotiate the best
package to suit our needs. The benefits
of this open market are estimated by the
Government to be worth £200 million to
customers and the UK economy through
the Open Water programme.
57
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Corporate Social Responsibility continued
Becoming more fuel efficient
Reducing our energy usage
23 tractor units
now conform to Euro 6 standards
We monitor fuel efficiency in detail across our
delivery fleet and have a programme in place
to replace the least fuel efficient vehicles in
the fleet. All new tractor units entering our
delivery fleet conform to Euro 6 emission
standards with significantly reduced CO2
emissions. More than half of our fleet of
43 tractor units now conforms to Euro 6
standards and the remainder will convert
upon replacement by 2019.
We have also updated our fleet with 14
new trailers that have been designed with
improved aerodynamic features to improve
fuel efficiency.
We are also undertaking an ongoing
programme of driver training to promote
both defensive driving and fuel-efficient
driving techniques.
The introduction of the Energy Savings
Opportunity Scheme ("ESOS") Regulations
2014, which brought into force Article 8
of the EU Energy Efficiency Directive,
made it mandatory for all large businesses
in the UK to undertake comprehensive
assessments of energy use and energy
efficiency opportunities at least once
every four years. To comply with these
regulations, qualifying companies are
required to appoint a qualified ‘Lead
Assessor’ and conduct a number
of assessments:
• Measure their total energy consumption
for buildings, industrial processes
and transport;
• Identify areas of significant energy
consumption, accounting for at least
90% of total energy consumption;
• Identify cost-effective energy efficiency
recommendations for areas of significant
energy consumption; and
• Report compliance to the Environment
Agency.
In completing our assessment of total energy
consumption, we identified energy use in
buildings in the form of gas and electricity,
and fleet diesel as the areas with the
potential to achieve significant savings.
More detailed analysis showed that whilst
63% of the energy use in a store could be
correlated to its size, a significant proportion
was driven by other, potentially controllable,
factors such as equipment efficiency and the
control of the equipment installed. Through
pilot studies in stores, we now have a clear
understanding of how we can effect savings.
Based on this we have begun to implement
a range of energy-saving measures.
Creating a well
controlled, efficiently
lit retail environment
We have piloted a Building Energy
Management System ("BEMS") in three
stores to identify the most efficient way to
maintain an appropriate environment through
the day for customers, colleagues and the
pets in our stores in the most energy efficient
way. Results from these stores have been
encouraging with a 35–40% reduction in the
daily energy load.
We have installed LED lighting across the
sales floors and back-stage areas in ten
stores, including the three stores with BEMS.
From the results of these trials we have
decided to instigate a programme that will
convert all stores to LED lighting with BEMS by
2018. We have established a new standard
for the installation of LED light in the
lightboxes over our fish tanks.
We now install LED lighting in all new pet
villages and aquatics systems. In addition
to consuming less energy, LED lights emit
less heat and, in aquatics systems,
encourage less algae growth. Both these
effects improve pet welfare.
External store signage is also being converted
to LED.
Impact of Energy Pack Installation
d
e
s
u
y
g
r
e
n
E
18
16
14
12
10
8
6
4
2
0
0
0
.
0
0
0
0
.
2
0
0
0
.
4
0
0
0
.
6
0
0
0
.
8
0
0
0
.
0
1
0
0
.
2
1
0
0
.
4
1
0
0
.
6
1
0
0
.
8
1
0
0
.
0
2
0
0
.
2
2
0
0
.
3
2
Time of day
Baseline
After installation of LED/BEMS
58
Pets at Home Group PlcAnnual Report and Accounts 2016
Minimising our
carbon footprint
5.34%
reduction in electricity consumption
We continue to monitor the CO2 emissions
from our business activities and to
challenge areas where reductions can be
made without compromising the welfare
of our pets or the comfort and safety of
our colleagues and customers.
Our electricity consumption over the year1
has been reduced modestly. However,
the expansion of in-store vet practices
and Groom Rooms, both of which have
inherently higher energy consumption than
our retail environment, have largely offset
the gains made elsewhere. To maintain
a suitable temperature for our colleagues,
customers and pets we have also installed
air-conditioning in 13 stores where there
was none previously. Measured per
square foot of store space, our electricity
consumption1 has been reduced by
5.34% compared to our 2012 baseline.
The rollout of LED lighting and BEMS
is expected to make significant
reductions in the years ahead.
Total diesel usage increased due to our
decision to bring pet deliveries in-house
to improve the welfare of our pets.
Carbon footprint summary
12%
1. Diesel (Core Fleet)
4%
2. Gas
1%
3. Red Diesel
4. Electricity
67%
5. Diesel (3rd Party) 6%
6. Fuel Used company cars (fuel cards)
2%
7. Personal business travel (Rail) 0%
0%
8. Personal business travel (Air)
2%
9. Personal business travel (Car)
5%
10. Electricity T&D losses
Fuel source (Tonnes of CO2e emissions)
Diesel (Core Fleet)
Gas
Red Diesel
Electricity
Diesel (3rd Party)
Fuel Used company cars (fuel cards)
Personal Business Travel (Rail)
Personal Business Travel (Air)
Personal Business Travel (Car)
Electricity T&D losses
789
6
5
10
1
32
4
2016
5,942
2,091
314
31,680
2,817
1,151
12
194
754
2,616
47,570
2015
5,272
2,400
286
32,424
2,806
1,012
19
197
769
2,835
48,021
• Pets at Home CO2e footprint has been calculated using the 2016 DEFRA emissions factor and based
on a Financial Control approach.
• In line with DEFRA methodology, electricity emissions have been split out into scope 2 indirect consumption
and scope 3 for transmission and distribution losses.
• 2015 saw the inclusion of limited scope 3 emissions including outsourced transportation and business
travel (car, rail and air), and this scope of reporting has been maintained for FY16.
• The contractors who maintain Pets at Home air-conditioning units do not have the systems in place to
provide the volume of F-Gas used each year. Due to the small volumes involved, this is considered to
be de minimis.
• During 2016 Pets at Home purchased a small number of Vet referral hospitals, these are currently being
transitioned to the Group energy supply contracts as they are currently on separate standalone contracts.
Once these are amalgamated on the Group supply they will be added to the carbon footprint for 2017.
Due to the scale of building relative to the existing estate this is considered to be de minimis.
• 2016 was a 53 week year. To ensure that the above CO2e footprint is comparable across different years,
the data has been normalised to reflect a standard 52 week year.
1 Refers to the 52 weeks proforma period to 24 March 2016.
59
Pets at Home Group PlcAnnual Report and Accounts 2016 Strategic reportOverview / Strategy / Performance Governance overview
Tony DeNunzio
Non-Executive Chairman
We continue to review our governance framework
and processes to enhance the way we operate
as a Board and deepen our strategic debate.”
Chairman’s introduction
Our governance framework is reviewed and benchmarked against
best practice every year. My role is to ensure that we have in place
strong and effective governance practices, that the Board is well
managed and has the correct balance of skills, diversity and
experience to successfully execute the Group’s long term strategy.
We have recently welcomed the appointment of Ian Kellett
as Group Chief Executive Officer to the Board, following the
resignation of Nick Wood. Ian has been a member of the Group’s
Board for the last ten years fulfilling the roles of Chief Financial
Officer and latterly the role of Chief Executive Officer of the Retail
Division. Over this time, Ian has steered the business through
continuous growth, played a pivotal role in the IPO and also the
expansion of our veterinary services with the acquisition of
Vets4Pets. His skills and experience build on our existing talent,
standing us in good stead for the year ahead. We very much look
forward to supporting him and the Executive Management Team
in setting and executing our strategic priorities to deliver the long
term success of the Group.
Our search for Ian’s replacement continues and in the interim we
have appointed Mark Adams who will oversee the finance department
during the intervening period. Mark has demonstrated leadership
in a number of business to consumer and publicly listed companies.
As well as succession planning, the Board, supported by the Audit
& Risk Committee also spent time on risk management which
involved reviewing the risk appetite across the Group alongside the
Group’s key risks. Whilst this process remains ongoing, we believe
that gaining a further understanding of our risk profile will help
support the implementation of our strategic programmes.
We conducted a further external evaluation on Board effectiveness
in 2016. During the year, we also progressed the actions that were
highlighted from the 2015 external evaluation, which enabled us
to further enhance our Board processes. This year’s review is
described in detail on page 81 and we are now working through
an action plan to build on our strong foundations together with
strengthening our culture and values which underpin our strategy
for the future.
The following Governance Report provides an additional overview
of the work of the Board during the year, our governance framework
and the key controls we have in place together with details of how
we have complied with the UK Corporate Governance Code 2014.
Tony DeNunzio
Non-Executive Chairman, Pets at Home Group Plc
25 May 2015
Board activities in 2016
Approved full year results, report and accounts and recommended
the final dividend.
Received reports on, and reviewed the effectiveness of, the Group’s
risk and control processes to support its strategy and objectives, and
approved the Company’s risk appetite statements.
Approved the Q1 Trading Statement.
Annual Strategy Meeting.
Succession planning.
Approved interim results and resolved to pay interim dividend.
Approved the Q3 Trading Statement.
Presentations on strategic priorities throughout the year.
Approved the appointment of Ian Kellett as the Group CEO following
the resignation of Nick Wood.
Reviewed the annual performance evaluation of the Board
and its committees.
Approved the Q4 Trading Statement.
60
Pets at Home Group PlcAnnual Report and Accounts 2016 The overall governance structure of the Group:
Pets at Home Group Plc Board
The Company is led and controlled by the Board. The Board has delegated certain responsibilities to Board Committees and the day
to day management to the Executive Management Team. Further details can be found on pages 77 to 79.
Board Committees
Audit & Risk Committee
Nomination & Corporate
Governance Committee
Remuneration Committee
Corporate Social Responsibility
Committee and Pets Before
Profit Committee
Members
Amy Stirling (Chairman)
Dennis Millard
Paul Coby
Paul Moody
Members
Tony DeNunzio (Chairman)
Dennis Millard
Tessa Green
Amy Stirling
Paul Coby
Brian Carroll
Paul Moody
Members
Paul Moody (Chairman)
Amy Stirling
Dennis Millard
Tessa Green
Members
Tessa Green (Chairman)
Dennis Millard
Paul Coby
Tony DeNunzio
Investment Committee
Health & Safety Committee
Executive Team and Operating Board
Executive Management Team
Board composition
Membership of the Board
Non-Executive Chairman
Executive Directors
Non-Executive Directors
Independent
Non-Executive Directors
Gender breakdown
Board of Directors
Male
Female
Gender breakdown
Executive Management
Gender breakdown
Group
1
1
1
5
75%
25%
Male
Female
60%
40%
Male
Female
60%
40%
61
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Board of Directors
Tony DeNunzio CBE
Non-Executive Chairman
Dennis Millard
Deputy Chairman and
Senior Independent
Non-Executive Director
Ian Kellett
Group Chief Executive
Officer
Amy Stirling
Independent Non-Executive
Director
Paul Coby
Independent Non-Executive
Director
Tessa Green CBE
Paul Moody
Brian Carroll
Louise Stonier
Independent Non-Executive
Independent Non-Executive
Non-Executive Director
Group Company Secretary
Director
Director
and Legal Director
Appointment to the Board
2014
Appointment to the Board
2014
Appointment to the Board
2014
Appointment to the Board
2014
Appointment to the Board
2014
Committees
Nomination & Governance,
Pets Before Profit, CSR
Committees
Nomination & Governance,
Audit & Risk, Remuneration,
Pets Before Profit, CSR
Committees
Nomination & Governance,
Audit & Risk, Remuneration
Committees
Nomination &
Governance, Audit & Risk,
Pets Before Profit, CSR
Appointment to the Board
Appointment to the Board
Appointment to the Board
Appointment to the Board
2014
Committees
Remuneration, Nomination
& Governance, Pets Before
Profit, CSR
2014
Committees
2014
Committees
Audit & Risk, Remuneration,
Nomination & Governance
Nomination & Governance
2014
Meetings attended
10/10
Meetings attended
10/10
Meetings attended
10/10
Meetings attended
10/10
Meetings attended
9/10
Meetings attended
Meetings attended
Meetings attended
Meetings attended
10/10
10/10
10/10
10/10
Current roles
Senior Independent Director
at Dixons Carphone plc
Non Executive Director of
PrimaPrix SL.
Non Executive Director of
DeNunzio Associates Ltd
Senior Advisor to Kohlberg,
Kravis, Roberts & Co. L.P.
Current roles
Chairman of Halfords
Group Plc
Non-Executive Director at
Debenhams Plc
Chairman of Trustees of
the charity The Holy Cross
Children’s Trust
Current roles
Group Chief Executive
Officer since April 2016
Joined Pets at Home as
Chief Financial Officer
in 2006
Appointed as Chief
Executive Officer of the
Retail Division in 2015
Current roles
Non-Executive member of
the Cabinet Office Board
and Chair of Audit and
Risk Committee
Non-Executive Director at
RIT Capital Partners Plc
Trustee of the Prince’s Trust
Current roles
IT Director at John Lewis
Board Member of SITA
(Societe Internationale de
Telecommunications
Aeronautique)
Board member of
Clydesdale and Yorkshire
Banking Group
Current roles
Trustee of the Royal
Foundation of the Duke and
Duchess of Cambridge
Current roles
Non-Executive Chairman
of Johnson Service Group
Non-Executive Director
of 4imprint Group Plc
Past roles
Chairman of Connect
Group Plc
Senior Independent Director
at Premier Farnell Plc
Senior Independent Director
of Xchanging Plc from
2005–2012
Past roles
Finance Director of
Staples retail business
from 2004–2006
Deputy Finance Director
of JD Wetherspoon from
1999–2004
Past roles
Chief Financial Officer
of the Prince’s Trust
Chief Financial Officer of
TalkTalk Telecom Group Plc
from 2010–2013
Chief Financial Officer
Telecoms Division –
Carphone Warehouse Group
Plc from 2007–2010
Past roles
Board member
of P&O Ferries
CIO at British Airways from
2001–2011
Civil Servant in the
Departments of Transport
and Environment
IT Director of Randalls
Cottages Ltd
Past roles
Chief Executive Officer of
Food Freshness Technology
Over 17 years at Britvic Plc,
with the last eight years
as Chief Executive Officer
until 2013
Past roles
Non-Executive Director of
Barts Health NHS Trust
Chairman of The Royal
Marsden NHS Foundation
Trust from 1998–2010
Chairman of The Royal
Marsden Cancer Campaign
Head of Corporate Affairs at
Carlton Communications Plc
Trustee of the Royal
Botanical Gardens, Kew
Brings to the Board
Wide ranging public
company experience
and retail and financial
expertise. Dennis is also
a Chartered Accountant.
Brings to the Board
Significant strategic and
operational expertise
through time spent at
Pets at Home.
Brings to the Board
Financial, accounting and
public company experience.
Amy is also a Chartered
Accountant.
Brings to the Board
Significant ecommerce,
international and systems
technology experience.
Brings to the Board
Considerable background in
the not-for-profit and
charitable sectors.
Brings to the Board
Deep consumer goods and
public company experience.
Brings to the Board
Strategic business,
financial and corporate
finance expertise.
Brings to the Board
Legal knowledge
and expertise.
Pets
Pets
Pets
Pets
Pets
Pets
Past roles
Non-Executive Chairman
of Maxeda
Non-Executive Director
of Alliance Boots
President and Chief
Executive Officer of Asda
from 2002–2005
Deputy Chairman
of Galiform Plc
(now Howdens Plc)
Chairman of the advisory
board of Manchester
Business School
Brings to the Board
Vast retail and financial
experience. Tony was also
awarded a CBE for services
to retail in 2005.
62
Current roles
Non-Executive Director of
Pets at Home since 2011
Member of Kohlberg Kravis
Roberts & Co. Partners LLP
and joined the firm in 1995.
Heads their consumer and
retail teams in Europe and
a member of the European
investment committee
Board Director at Laureate
Education International,
Cognita Holdings Limited,
SMCP SAS, Northgate
Information Solutions
Limited and Afriflora
Past roles
Corporate finance and
merchant banking team
member at Donaldson,
Lufkin & Jenrette
Current roles
Company Secretary and
Legal Director of Pets at
Home Group since 2004
Chair and Trustee of the
charity Support Adoption
For Pets
Past roles
Associate in the corporate
team at DLA Piper LLP from
2000–2004
Solicitor at CMS Cameron
McKenna from 1997–2000
Pets at Home Group PlcAnnual Report and Accounts 2016
Committees
Nomination & Governance,
Pets Before Profit, CSR
Committees
Nomination & Governance,
Audit & Risk, Remuneration,
Pets Before Profit, CSR
Current roles
Current roles
Senior Independent Director
Chairman of Halfords
at Dixons Carphone plc
Group Plc
Non Executive Director of
Non-Executive Director at
PrimaPrix SL.
Debenhams Plc
Non Executive Director of
DeNunzio Associates Ltd
Senior Advisor to Kohlberg,
Kravis, Roberts & Co. L.P.
Chairman of Trustees of
the charity The Holy Cross
Children’s Trust
Current roles
Group Chief Executive
Officer since April 2016
Joined Pets at Home as
Chief Financial Officer
in 2006
Appointed as Chief
Executive Officer of the
Retail Division in 2015
Committees
Nomination & Governance,
Audit & Risk, Remuneration
Current roles
Non-Executive member of
the Cabinet Office Board
and Chair of Audit and
Risk Committee
Non-Executive Director at
RIT Capital Partners Plc
2014
Committees
Nomination &
Governance, Audit & Risk,
Pets Before Profit, CSR
Current roles
IT Director at John Lewis
Board Member of SITA
(Societe Internationale de
Telecommunications
Aeronautique)
Board member of
Banking Group
Trustee of the Prince’s Trust
Clydesdale and Yorkshire
Non-Executive Chairman
Chairman of Connect
Past roles
Group Plc
Senior Independent Director
at Premier Farnell Plc
Senior Independent Director
of Xchanging Plc from
2005–2012
Past roles
Finance Director of
Staples retail business
from 2004–2006
Deputy Finance Director
of JD Wetherspoon from
1999–2004
Past roles
Chief Financial Officer
of the Prince’s Trust
Chief Financial Officer of
TalkTalk Telecom Group Plc
from 2010–2013
Chief Financial Officer
Telecoms Division –
Carphone Warehouse Group
Plc from 2007–2010
Past roles
Board member
of P&O Ferries
CIO at British Airways from
2001–2011
Civil Servant in the
Departments of Transport
and Environment
IT Director of Randalls
Cottages Ltd
Past roles
of Maxeda
Non-Executive Director
of Alliance Boots
President and Chief
Executive Officer of Asda
from 2002–2005
Deputy Chairman
of Galiform Plc
(now Howdens Plc)
Chairman of the advisory
board of Manchester
Business School
Brings to the Board
Vast retail and financial
experience. Tony was also
awarded a CBE for services
to retail in 2005.
Tony DeNunzio CBE
Non-Executive Chairman
Dennis Millard
Deputy Chairman and
Senior Independent
Non-Executive Director
Ian Kellett
Officer
Group Chief Executive
Independent Non-Executive
Independent Non-Executive
Amy Stirling
Director
Paul Coby
Director
Tessa Green CBE
Independent Non-Executive
Director
Paul Moody
Independent Non-Executive
Director
Brian Carroll
Non-Executive Director
Louise Stonier
Group Company Secretary
and Legal Director
Appointment to the Board
Appointment to the Board
Appointment to the Board
Appointment to the Board
Appointment to the Board
2014
2014
2014
2014
Appointment to the Board
2014
Appointment to the Board
2014
Appointment to the Board
2014
Appointment to the Board
2014
Meetings attended
Meetings attended
Meetings attended
Meetings attended
Meetings attended
10/10
10/10
10/10
10/10
9/10
Meetings attended
10/10
Meetings attended
10/10
Meetings attended
10/10
Meetings attended
10/10
Committees
Remuneration, Nomination
& Governance, Pets Before
Profit, CSR
Committees
Audit & Risk, Remuneration,
Nomination & Governance
Committees
Nomination & Governance
Current roles
Trustee of the Royal
Foundation of the Duke and
Duchess of Cambridge
Current roles
Non-Executive Chairman
of Johnson Service Group
Non-Executive Director
of 4imprint Group Plc
Past roles
Chief Executive Officer of
Food Freshness Technology
Over 17 years at Britvic Plc,
with the last eight years
as Chief Executive Officer
until 2013
Past roles
Non-Executive Director of
Barts Health NHS Trust
Chairman of The Royal
Marsden NHS Foundation
Trust from 1998–2010
Chairman of The Royal
Marsden Cancer Campaign
Head of Corporate Affairs at
Carlton Communications Plc
Trustee of the Royal
Botanical Gardens, Kew
Current roles
Non-Executive Director of
Pets at Home since 2011
Member of Kohlberg Kravis
Roberts & Co. Partners LLP
and joined the firm in 1995.
Heads their consumer and
retail teams in Europe and
a member of the European
investment committee
Board Director at Laureate
Education International,
Cognita Holdings Limited,
SMCP SAS, Northgate
Information Solutions
Limited and Afriflora
Past roles
Corporate finance and
merchant banking team
member at Donaldson,
Lufkin & Jenrette
Current roles
Company Secretary and
Legal Director of Pets at
Home Group since 2004
Chair and Trustee of the
charity Support Adoption
For Pets
Past roles
Associate in the corporate
team at DLA Piper LLP from
2000–2004
Solicitor at CMS Cameron
McKenna from 1997–2000
Brings to the Board
Wide ranging public
company experience
and retail and financial
expertise. Dennis is also
a Chartered Accountant.
Brings to the Board
Significant strategic and
operational expertise
through time spent at
Pets at Home.
Brings to the Board
Financial, accounting and
public company experience.
Amy is also a Chartered
Accountant.
Brings to the Board
Significant ecommerce,
international and systems
technology experience.
Brings to the Board
Considerable background in
the not-for-profit and
charitable sectors.
Brings to the Board
Deep consumer goods and
public company experience.
Brings to the Board
Strategic business,
financial and corporate
finance expertise.
Brings to the Board
Legal knowledge
and expertise.
Pets
Pets
Pets
Pets
Pets
Pets
63
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report
Executive Management Team
The Board is supported by a highly experienced
management team. Operational day-to-day matters are
delegated to the Group Chief Executive Officer together
with the rest of the Executive Management Team.
Ian Kellett
Group Chief Executive Officer
Mark Adams
Interim Group Chief Financial Officer
Joined Pets at Home
2006
Joined Pets at Home
2016
Biography
Ian joined Pets at Home as Chief Financial Officer in
April 2006, was appointed as Chief Executive Officer
of the Retail Division in June 2015 and moved to
the role of Group Chief Executive Officer in April 2016.
During his ten years at Pets at Home, Ian was
involved in the sale of the business to KKR in
2010, the acquisition of Vets4Pets in 2013 and
the IPO of the Group in 2014. As well as focusing
primarily on his role as CFO and more recently as
Chief Executive Officer of Retail Division, Ian has
previously held responsibility for distribution and
logistics, and the strategic development of the
business across both Merchandise and Services.
In addition, Ian has been a member of the Vet
Group Board for the last ten years.
Previous to his time at Pets at Home, Ian was
Finance Director of Staples’ retail business in
the UK between 2004–2006 and Deputy Finance
Director of JD Wetherspoon plc between
1999–2004.
Biography
Mark joined Pets at Home in March 2016 as Interim
Chief Financial Officer.
Mark is a graduate Chartered Accountant with
over 20 years' experience operating at a senior level
across a number of different sectors with a focus
on consumer facing businesses. His recent career
includes CFO roles at Cognita Schools, easyJet plc,
Alpha Airports Group plc and STA Travel Group.
Over recent years, Mark has been keen to use
his skills and experience in the charitable sector.
He currently serves as a board member of
Development Media International, a UK-based
non-profit organisation that specialises in running
evidence-based media campaigns to change
behaviours and improve lives in developing countries.
Sally Hopson MBE
Chief Executive Officer
of Services
Joined Pets at Home
2008
Biography
Sally joined Pets at Home in 2008 as the Customer,
People and Development Director and became
Chief Executive Officer of Services in June 2015.
Sally joined Pets at Home in December 2008 from
Asda where she held a number of senior roles over
14 years. After graduating from the School of
Oriental and African Studies at the University of
London with a degree in Middle Eastern History,
Sally joined the graduate scheme at Habitat and
began a long and enjoyable career in retailing.
Sally is also a Non-Executive Director for the
Retail Trust and for Jardiland, a French garden
centre chain. A particular interest in diversity led
to a four year period as a commissioner on The
Women in Work Commission and the Learning
and Skills Council which was recognised in an
MBE awarded in 2006.
Peter Pritchard
Chief Executive Officer of Retail
Joined Pets at Home
2011
Biography
Peter joined Pets at Home in January 2011 as
Commercial Director and moved to the role of
Chief Executive Officer of Retail in March 2016.
Peter has worked in retail for 25 years in various
senior operational and commercial roles. Previous
companies include Asda, Sainsbury’s, Iceland,
Marks and Spencer and Wilkinson Hardware
Administration from Stirling University.
Peter is a Trustee of Community Integrated Care,
one of the UK’s largest health and social care
charities. They work in the community delivering
life enhancing support to people with learning
difficulties, mental health concerns, autism,
age related needs and dementia.
Louise Stonier
Group Company Secretary
and Legal Director
Joined Pets at Home
2004
Biography
Louise joined Pets at Home in 2004 as Head of
Legal and Company Secretary and was promoted
to Group Legal Director and Company Secretary
in 2008. Louise is also the Chair and Trustee of the
charity, Support Adoption For Pets.
Louise graduated from Nottingham University with
an LLB (Hons) and joined CMS Cameron McKenna
solicitor in 1999, Louise moved to DLA Piper
LLP and as an associate in the Corporate Team,
acted on a number of corporate finance and
M&A transactions.
Stores. Peter has a Masters Degree in Business
as a trainee solicitor. After qualifying as a Corporate
Pets
Pets
Pets
Pets
64
Pets at Home Group PlcAnnual Report and Accounts 2016
Ian Kellett
Group Chief Executive Officer
Mark Adams
Interim Group Chief Financial Officer
Joined Pets at Home
2006
Biography
Joined Pets at Home
2016
Biography
Sally Hopson MBE
Chief Executive Officer
of Services
Joined Pets at Home
2008
Biography
Ian joined Pets at Home as Chief Financial Officer in
Mark joined Pets at Home in March 2016 as Interim
Sally joined Pets at Home in 2008 as the Customer,
April 2006, was appointed as Chief Executive Officer
Chief Financial Officer.
over 20 years' experience operating at a senior level
Sally joined Pets at Home in December 2008 from
Mark is a graduate Chartered Accountant with
across a number of different sectors with a focus
on consumer facing businesses. His recent career
includes CFO roles at Cognita Schools, easyJet plc,
Alpha Airports Group plc and STA Travel Group.
Over recent years, Mark has been keen to use
his skills and experience in the charitable sector.
He currently serves as a board member of
Development Media International, a UK-based
non-profit organisation that specialises in running
evidence-based media campaigns to change
behaviours and improve lives in developing countries.
People and Development Director and became
Chief Executive Officer of Services in June 2015.
Asda where she held a number of senior roles over
14 years. After graduating from the School of
Oriental and African Studies at the University of
London with a degree in Middle Eastern History,
Sally joined the graduate scheme at Habitat and
began a long and enjoyable career in retailing.
Sally is also a Non-Executive Director for the
Retail Trust and for Jardiland, a French garden
centre chain. A particular interest in diversity led
to a four year period as a commissioner on The
Women in Work Commission and the Learning
and Skills Council which was recognised in an
MBE awarded in 2006.
of the Retail Division in June 2015 and moved to
the role of Group Chief Executive Officer in April 2016.
During his ten years at Pets at Home, Ian was
involved in the sale of the business to KKR in
2010, the acquisition of Vets4Pets in 2013 and
the IPO of the Group in 2014. As well as focusing
primarily on his role as CFO and more recently as
Chief Executive Officer of Retail Division, Ian has
previously held responsibility for distribution and
logistics, and the strategic development of the
business across both Merchandise and Services.
In addition, Ian has been a member of the Vet
Group Board for the last ten years.
Previous to his time at Pets at Home, Ian was
Finance Director of Staples’ retail business in
the UK between 2004–2006 and Deputy Finance
Director of JD Wetherspoon plc between
1999–2004.
Pets
Peter Pritchard
Chief Executive Officer of Retail
Joined Pets at Home
2011
Biography
Peter joined Pets at Home in January 2011 as
Commercial Director and moved to the role of
Chief Executive Officer of Retail in March 2016.
Peter has worked in retail for 25 years in various
senior operational and commercial roles. Previous
companies include Asda, Sainsbury’s, Iceland,
Marks and Spencer and Wilkinson Hardware
Stores. Peter has a Masters Degree in Business
Administration from Stirling University.
Peter is a Trustee of Community Integrated Care,
one of the UK’s largest health and social care
charities. They work in the community delivering
life enhancing support to people with learning
difficulties, mental health concerns, autism,
age related needs and dementia.
Louise Stonier
Group Company Secretary
and Legal Director
Joined Pets at Home
2004
Biography
Louise joined Pets at Home in 2004 as Head of
Legal and Company Secretary and was promoted
to Group Legal Director and Company Secretary
in 2008. Louise is also the Chair and Trustee of the
charity, Support Adoption For Pets.
Louise graduated from Nottingham University with
an LLB (Hons) and joined CMS Cameron McKenna
as a trainee solicitor. After qualifying as a Corporate
solicitor in 1999, Louise moved to DLA Piper
LLP and as an associate in the Corporate Team,
acted on a number of corporate finance and
M&A transactions.
Pets
Pets
Pets
65
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report
Directors’ Report
This section of the Annual Report includes additional information
required to be disclosed under the Companies Act 2006 (“Companies
Act”), the UK Corporate Governance Code 2014 (“Code”), the Disclosure
and Transparency Rules (“DTRs”) and the Listing Rules (“LRs”) of the
Financial Conduct Authority (“FCA”).
Pets at Home Group Plc
Registered Number:
Registered Office:
Telephone Number:
Date of Incorporation:
Country of Incorporation:
Type:
8885072
Epsom Avenue, Stanley Green Trading Estate, Handforth, Cheshire, SK9 3RN
+44 161 486 6688
10 February 2014
England and Wales
Public Limited Company
Statutory information
The Company has chosen in accordance with Section 414C(11) of the Companies Act to provide disclosures and information in relation
to a number of additional matters which are covered elsewhere in this Annual Report. These matters and cross-references to the
relevant sections of this Annual Report are shown in the following table.
Statutory information
Amendment of the Articles
Section heading
Directors' Report
Appointment and Removal of Directors Directors' Report
Board of Directors
Branches outside of the UK
Change of Control
Colleague Involvement
Directors' Report
Board of Directors
Directors' Report
Directors' Report
Exceptional Colleague
Engagement –Corporate
Social Responsibility
Directors' Report
Colleagues' Diversity and Disabilities
Directors' Report
Colleague Share Ownership and Plans
Remuneration Report
Community
Heart of the Community
Corporate Social Responsibility
Compensation for loss of office
Directors' Report
Compliance with the terms of the
Relationship Agreement (including
the independence provisions)
Directors' Biographies
Directors' Indemnities
Directors' Report
Board of Directors
Directors' Report
Directors' information to Auditors
Directors' Report
Directors’ Interests
Directors' Report
Directors' Responsibility Statement
Directors' Report
Executive Share Plans
Remuneration report
Financial Instruments
Note 22 to the consolidated
financial statements
Future Developments of the Business
Strategic Report
Page
70
68
68
62–63
72
70
47
67
67
89
51–53
70
70
62–63
69
72
80
73
93
99–101
146–155
20–25
Statutory information
Independent Auditors
Internal Controls and
Risk Management
Political Donations
Profits and Dividend
Post Balance Sheet Events
Powers for the Company to
issue or buy back its shares
Powers of the Directors
Principal Activities
Relationship Agreement
Research and Development
Section heading
Governance Report
Governance Report
Directors' Report
Directors' Report
Directors' Report
Directors' Report
Directors' Report
Directors' Report
Directors' Report
Governance Report
Directors' Report/
Strategic Report – Product
& Innovation
Restrictions on transfer of securities
Directors' Report
Share capital
Significant related party transactions
Directors' Report
Note 21 to the consolidated
financial statements
Directors' Report
Note 27 to the consolidated
financial statements
Significant Shareholders
Directors' Report
Subsidiary and Associated
Undertakings
Note 29 to the consolidated
financial statements
Statement of Corporate Governance
Governance Report
The Audit & Risk Committee Report
Governance Report
The Governance Report
Governance Report
The Directors' Remuneration Report
Governance Report
Financial position of the Group,
its cash flow, liquidity position
and borrowing facilities
Greenhouse Gas Emissions
Going Concern
Health and Safety
Human Rights and Modern
Slavery Statement
Finance review
Corporate Social
Responsibility
Directors' Report
Governance Report
Corporate Social Responsibility
Directors' Report
66
32–33
The Nomination and Corporate
Governance Committee Report
The Strategic Report
Governance Report
Governance Report
Treasury and Risk Management
Strategic Report
Viability Statement
Voting Rights
Directors' Report
Directors' Report
59
71
79
50
72
Page
78
79–80
71
70
71
68
68
67
70
67
3
69
69
144–145
70
159
69
161–171
74
82–85
74–81
88–107
86–87
1–59
43
71
69
Pets at Home Group PlcAnnual Report and Accounts 2016
Colleague diversity and disabled persons
The Group’s policy for colleagues and all applicants for employment
is to match the capabilities and talents of each individual to the
appropriate job. We are committed to ensuring that equality of
opportunity in all colleague relations. We aim to ensure that no
colleague, potential colleague, customer, visitor or contractor
will receive less favourable treatment on the grounds of:
• Sex
• Pregnancy and maternity
• Disability
• Religious beliefs
• Marital status
• Race
• Ethnic origin
• Nationality
• Age
• Sexual orientation or following gender reassignment
• Colour
Applications for employment by disabled persons are given full
and fair consideration for all vacancies, and are assessed in
accordance with their particular skills and abilities. The Group
does all that is practicable to meet its responsibilities towards the
training and employment of disabled people, and to ensure that
training, career development and promotion opportunities are
available to all colleagues.
The Group makes every effort to provide continuity of employment
where current employees become disabled. Attempts are made in
every circumstance to provide employment, whether this involves
adapting the current job role and remaining in the same job, or moving
to a more appropriate job role.
Disclosures required under Listing Rule 9.8.4R
The information required by LR 9.8.4R is disclosed on the following
pages of this Annual Report:
Disclosure
Long term incentive schemes
Significant contracts
Dividend waivers
Page
99–101
70
Note 9 to the consolidated
financial statements 134
Principal activities
The principal activity of the Group is that of a specialist retailer
of pet food, pet related products and pet accessories. The Group
is also the operator of a small animal veterinary business and
pet grooming salons and the multi-channel equestrian retailer,
Ride-away. The Group has also opened a new format, dog focused
high street store called Barkers, which offers premium products
and services targeted at highly engaged dog owners. The principal
activity of the Company is that of a holding company. The
Company’s registrar is Computershare Investor Services Plc
situated at The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ.
Research and development
The Strategic Report sets out on pages 3, 10 and 21,
the innovation carried out by the Group in relation to
product development.
In addition, the Group also funds a number of research projects
and this year we have continued to co-fund a Doctor of Philosophy
(“PhD”) at Exeter University which is looking at how to reduce the
stress suffered by fish when they are transported. The PhD is
being co-funded with an executive agency called CEFAS ("Centre
for Environment Fisheries and Aquaculture Science") which is
sponsored by DEFRA ("Department for Environment, Food & Rural
Affairs") and advises DEFRA, as well as other public and private
sector customers, on issues connected to the aquatic
environment.
Colleague involvement
The Group places significant emphasis on colleague engagement
at all levels. Colleagues are kept informed of issues affecting the
Group through formal and informal meetings and through the
Group’s internal written communications. Further information on
colleague engagement is included in the CSR Report on page 47.
Details of the Group’s employee share plans are contained in the
Directors’ Remuneration Report.
67
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report
Directors’ Report continued
Directors
The names of the persons who, at any time during the financial
year, were Directors of the Company are:
Name
Tony DeNunzio
Nick Wood
Ian Kellett
Dennis Millard
Brian Carroll
Tessa Green
Paul Coby
Amy Stirling
Paul Moody
Date of appointment
18 February 2014
11 February 2014
11 February 2014
18 February 2014
18 February 2014
18 February 2014
18 February 2014
18 February 2014
25 March 2014
Date of resignation
n/a
4 April 2016
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Nick Wood resigned from his position as Chief Executive Officer of
the Group on 4 April 2016 although he will remain as an employee
of the Company until 1 July 2016. Nick Wood was succeeded by
Ian Kellett on 4 April 2016.
Appointment and removal of a Director
A Director may be appointed by an ordinary resolution of
shareholders in a general meeting following recommendation
by the Nomination & Corporate Governance Committee in
accordance with its terms of reference as approved by the Board
or by a member (or members) entitled to vote at such a meeting,
or following retirement by rotation if the Director chooses to seek
re-election at a general meeting.
In addition, the Directors may appoint a Director to fill a vacancy or
as an additional Director, provided that the individual retires at the
next AGM. A Director may be removed by the Company in certain
circumstances set out in the Company’s Articles of Association
or by a special resolution of the Company.
Specific details relating to the Principal Shareholder, KKR My Best
Friend Limited, an affiliate of Kohlberg Kravis Roberts & Co. L.P.,
and their right to appoint Directors are set out in the Governance
Report on page 75.
All Directors will stand for re-election on an annual basis, in line
with the recommendations of the Code.
Powers of the Directors
Subject to the Articles, the Companies Act and any directions given
by the Company by special resolution and any relevant statues and
regulations, the business of the Company will be managed by the
Board who may exercise all the powers of the Company.
Specific powers relating to the allotment and issuance of ordinary
shares and the ability of the Company to purchase its own securities
are also included within the Articles and such authorities are
submitted for approval by the shareholders at the AGM each year.
The authorities conferred on the Directors at the 2015 AGM, held
on 9 September 2015, will expire on the date of the 2016 AGM.
Since the date of the 2015 AGM, the Directors have not exercised
any of their powers to issue, or purchase, ordinary shares in the
share capital of the Company.
Directors’ interests
The Directors’ interests in and options over, ordinary shares in
the Company are shown in the Directors’ Remuneration Report
on page 93.
Since the end of the financial year and the date of this report,
there have been no changes to such interests.
In line with the requirements of the Companies Act, each Director
has notified the Company of any situation in which he or she has,
or could have, a direct or indirect interest that conflicts, or possibly
may conflict, with the interests of the Company (a situational
conflict). These were considered and approved by the Board in
accordance with the Articles and each Director informed of the
authorisation and any terms on which it was given. The Board has
formal procedures to deal with Directors’ conflicts of interest. The
Board reviews and, where appropriate, approves certain situational
conflicts of interest that were reported to it by Directors, and a
register of those situational conflicts is maintained and is reviewed
by the Board on an ongoing basis.
68
Pets at Home Group PlcAnnual Report and Accounts 2016 Directors’ indemnities
Each Director of the Company has the benefit of a qualifying
indemnity, as defined by section 236 of the Companies Act,
and as permitted by the Articles, as well as prospectus liability
insurance which provides cover for liabilities incurred by Directors
in the performance of their duties or powers in connection with the
issue of the Company’s prospectus dated 28 February 2014 in
relation to the Listing. In addition, all directors and officers of Group
companies are covered by Directors & Officers liability insurance.
No amount was paid under any of these indemnities or insurances
during the year other than the applicable insurance premiums.
Share capital
The issued share capital of the Company as at 31 March 2016
and 25 May 2016, being the latest practicable date prior to
the date of this Annual Report, comprises 500,000,000 ordinary
shares of 1 pence each. Further information regarding the
Company’s issued share capital can be found in note 21 of
the Group’s financial statements.
There have been no movements in the Company’s issued share
capital in the 2016 reporting period.
Details of employee share schemes are provided in note 23 to
the Group’s financial statements.
Shareholder’s voting rights
All members who hold ordinary shares are entitled to attend and
vote at the AGM. On a show of hands at a general meeting every
member present in person shall have one vote and on a poll, every
member present in person or by proxy shall have one vote for every
ordinary share held. No shareholder holds ordinary shares carrying
special rights relating to the control of the Company and the
Directors are not aware of any agreements between holders of the
Company’s shares that may result in restrictions on voting rights.
Restrictions on transfer of ordinary shares
The Articles do not contain any restrictions on the transfer of
ordinary shares in the Company other than the usual restrictions
applicable where any amount is unpaid on a share. All issued
share capital of the Company at the date of this Annual Report
is fully paid. Certain restrictions are also imposed by laws and
regulations (such as insider trading and marketing requirements
relating to close periods) and requirements of the LRs whereby
Directors and certain employees of the Company require Board
approval to deal in the Company’s securities.
For a period of one year following the date of the Company’s
Listing, each of the Executive Directors, the Chairman and the
Senior Executives (excluding the Group Company Secretary) (each,
a “Restricted Shareholder”) agreed, on the terms and subject to
the conditions of the Underwriting Agreement, not to dispose of
any of the ordinary shares they hold in the Company (the “Initial
Lock-Up Period”). Although the Initial Lock-Up Period expired
on 16 March 2015, each Restricted Shareholder also entered
into a lock-up deed dated 12 March 2014 with the Company.
On the terms of each lock-up deed, each Restricted Shareholder
undertook, for an additional period of 365 days (commencing on
the termination of the Initial Lock-Up Period), not to dispose of
more than a specified number of ordinary shares in the Company
(in each case, approximately 50% of the relevant Restricted
Shareholder’s holding of ordinary shares). The additional lock-up
periods expired on 16 March 2016.
All of the above arrangements are subject to certain
customary exceptions.
Significant shareholdings
As at 31 March 2016 and 25 May 2016, being the latest practicable date prior to the date of this Annual Report, the Company has been
notified pursuant to DTR5 of the following interests representing 3% or more of the issued ordinary share capital of the Company:
Number of
ordinary shares as
at 31.03.16
% of issued
share capital
Number of
ordinary shares
as at 25.05.16
% of issued
share capital
Nature of holding
(direct/indirect)
Name of shareholder
KKR My Best
Friend Limited1
MBF Co-Invest L.P.1
Schroders Investment
Management
Old Mutual Plc
Kames Capital Plc
GIC Private Ltd
1 an affiliate of Kohlberg Kravis Roberts & Co. L.P.
99,372,190
23,640,896
35,584,330
65,381,183
15,012,970
24,966,634
19.9%
4.7%
7.12%
13.08%
3.00%
4.9933%
99,372,190
23,640,896
35,584,330
70,836,503
14,888,768
24,966,634
19.9%
4.7%
7.12 %
14.17%
3.00%
4.99%
Direct
Direct
Direct
Direct
Direct
Direct
69
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Directors’ Report continued
Transactions with related parties
The only subsisting material transactions which the Company has
entered into with related parties are:
Amendment of the Articles
The Articles may only be amended by a special resolution of the
Company’s shareholders in a general meeting, in accordance with
the Companies Act.
Profits and dividend (before exceptional items)
The consolidated profit for the year after taxation was
£77,079,000 (FY15: £67,876,000). The results are discussed
in greater detail in the finance review on pages 30 to 33.
A final dividend of 5.5 pence per share (FY15: 3.6 pence per
share) will be recommended to the Company’s shareholders
in respect of the 2016 financial year. The final dividend will be
proposed by the Directors at the AGM on 14 September 2016 in
respect of the year ended 31 March 2016 to add to an interim
dividend of 2.0 pence per share paid on 8 January 2016
(FY15: 1.8 pence per share).
The Directors’ proposed final dividend of 5.5 pence per share
takes the total dividend payable in respect of the 2016 financial
year to 7.5 pence per share. The ex-dividend date will be 18 August
2016 and, subject to shareholder approval at the 2016 AGM, the
final dividend of 5.5 pence per share will be paid to shareholders
on the register at the close of business on 19 August 2016.
Compensation for loss of office and change of control
There are no agreements between the Company and its Directors
or colleagues providing for additional compensation for loss of
office or employment (whether through resignation, redundancy
or otherwise) that occurs because of a takeover bid.
The only significant agreements to which the Company is a party
that take effect, alter or terminate upon a change of control of the
Company following a takeover bid, and the effect thereof, are
as follows:
• The Relationship Agreement with the Principal Shareholder
contains a provision allowing the Principal Shareholder to
terminate the agreement with immediate effect if any person
acquires control of the Company (namely holding and/or
ownership of the beneficial interest in and/or the ability to
exercise the voting rights applicable to ordinary shares or other
securities in the Company which confer, in aggregate on the
holders, whether directly or indirectly, more than fifty per cent.
of the voting rights exercisable at general meetings of the
Company) or the Company ceases to be Listed.
• Relationship Agreement: The Relationship Agreement was
entered into on 28 February 2014 and regulates the relationship
between KKR My Best Friend Limited (the “Principal
Shareholder”) and the Company following Listing. Subject to
a certain minimum shareholding, the Relationship Agreement
details the rights the Principal Shareholder has to representation
on the Board and Nomination & Corporate Governance
Committee; appoint observers to the Remuneration, Audit & Risk
and the Pets Before Profit/CSR Committees and certain anti-
dilution rights. The Company has also undertaken to cooperate
with the Principal Shareholder in the event of a sale of the
ordinary shares by the Principal Shareholder at any time.
The Relationship Agreement complies with the requirements of
the LRs, including LR 9.2.2AR(2)(a), which came into effect on
16 May 2014, and LR 6.1.4DR.
In accordance with the requirements of LR 9.8.4(14), the Board
confirms that the Company has complied with its obligations
under the Relationship Agreement, including in respect of the
independence provisions set out therein, at all times since it
was entered into, including throughout the period under review,
and, so far as the Company is aware, KKR My Best Friend
Limited and its associates have complied with the provisions
of the Relationship Agreement (including the independence
provisions set out therein), at all times since it was entered
into, including throughout the period under review.
• Senior Facilities Agreement: KKR Capital Markets Limited
(“KCM”), an affiliate of the Principal Shareholder, was entitled
to receive a syndication agent fee equal to 0.50% of the total
commitments under the terms of a senior facilities agreement
dated 18 February 2014 (“Senior Facilities Agreement”) entered
into in connection with the Listing.
• Amendment to the Senior Facilities Agreement: On 14 April
2015, the Company and certain of its subsidiaries entered into
an amendment agreement (the “Amendment Agreement”) to the
Senior Facilities Agreement. KCM received fees of £500,000
(period to 26 March 2015: £nil), relating to professional services
associated with debt financing following the refinancing of the
Pets at Home Group in April 2015.
Further details of the Group’s banking facilities are shown in note
18 on page 142 of the financial statements. Certain of the
payments made under the Amendment to the Senior Facilities
Agreement have been made this financial year.
70
Pets at Home Group PlcAnnual Report and Accounts 2016
• The Senior Facilities Agreement and the Amendment Agreement
contain customary prepayment, cancellation and default provisions
including, if required by a lender, mandatory prepayment of all
utilisations provided by that lender upon the sale of all or substantially
all of the business and assets of the Group or a change of control.
Political donations
The Group made no political donations and incurred no political
expenditure during the year (FY15: nil). It remains the Company’s
policy not to make political donations or to incur political
expenditure, however the application of the relevant provisions
of the Companies Act is potentially very broad in nature and,
as last year, the Board is seeking shareholder authority to ensure
that the Group does not inadvertently breach these provisions as
a result of the breadth of its business activities, although the
Board has no intention of using this authority.
Suppliers
The Group understands the importance of maintaining good
relationships with suppliers and it is Group policy to agree
appropriate terms and conditions for its transactions with
suppliers (ranging from standard written terms to individually
negotiated contracts) and for payment to be made in accordance
with these terms, provided the supplier has complied with its
obligations. Average trade creditors of the Group’s UK operations
for FY16 were 46 days (FY15: 42 days).
Post balance sheet events
The Group acquired two veterinary specialist referral centres post
year end. These are:
• Dick White Referrals, based in Cambridgeshire, and which is
one of the UK’s largest small animal specialist veterinary referral
centres, treating over 5,000 cases each year and employing
31 veterinary specialists across a wide range of areas. A 76%
ownership stake was acquired. It will operate as a shared venture
model through which the founder, Professor Dick White, and the
key clinicians, will retain 24% equity ownership.
• Eye Vet Referrals, a dedicated Opthalmology centre with six
veterinary specialists, which is based in Cheshire and already
provides services to one of our referral centres, NorthWest
Surgeons as well as to other primary opinion veterinary practices.
Eye Vet Referrals will also operate as a shared venture, with the
founders retaining 10% equity ownership.
Going concern
On the basis of current financial projections and facilities available,
the Directors are satisfied that the Group is well placed to manage
its business risks successfully and therefore have a reasonable
expectation that the Group have adequate resources to continue
in operational existence for a period of 12 months from the date
of approval of the financial statements. Accordingly, the financial
statements continue to be prepared on a going concern basis.
Viability statement
The Group has developed a detailed strategic and business
planning (“SBP”) process, which comprises a strategic plan
(“Plan”) containing financial projections for a number of future
years and a business plan which forms a detailed near term one
year plan for the current financial year. The SBP process produces
standard outputs in respect of the key financial performance
metrics of the Group which deliver consolidated financial plans
at both Group level and at a number of levels within the Group.
The Plan is reviewed each year by the Board as part of the strategy
review process. Once approved by the Board, the Plan is cascaded
across the Group and provides the basis for setting all detailed
financial budgets and strategic actions that are subsequently
used by the Board to monitor performance.
The SBP process covers a three year period. The three year plan
provides a robust planning tool against which strategic decisions
can be made. In making their viability assessment, the Board has
taken into consideration that financing facilities are maintained
for the duration of the Plan. The Directors have considered a
combination of risks and uncertainties and the mitigating controls
operated by the Group as detailed on pages 38 to 43 that may
impact on the Group’s reputation and its ability to trade. These
risks include issues on pet welfare, competitor activity and broader
macro-economic risks and their impact on the Strategic Plan on
an individual and combined level.
On this basis and in conjunction with other matters considered and
reviewed by the Board during the year, the Board has reasonable
expectations that the Group will be able to continue in operation
and meet its liabilities as they fall due over the three financial
years used for their assessment. In making this assessment,
the Board have assumed that there is no material change in the
legislative environment in relation to the sale of small animals
and the practice of veterinary medicine. It is recognised that
such future assessments are subject to a level of uncertainty
that increases with time and, therefore future outcomes cannot
be guaranteed or predicted with certainty.
71
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Directors’ Report continued
Human rights and modern slavery statement
Pets at Home is the UK’s leading specialist retailer of pets, pet
related products and services. We run the UK’s largest small
animal veterinary and grooming businesses through our vets and
services brands.
Our mission is to be the best pet shop in the world. We therefore
take great care in operating our business and in selecting our
business partners and suppliers. The products we sell are sourced
from a broad range of suppliers, both national and international.
We are the only UK pet retailer to have a dedicated sourcing office
in the Far East. From our regional base in Hong Kong, which
opened in 2012, we have a team of product technologists who
support our buyers, oversee our suppliers and monitor production.
Our suppliers are required to comply with our Ethical Trading Policy
and we undertake ethical audits which cover: hours of work, labour
practices, working conditions, onsite accommodation, health &
safety, environment, supply chain management and wages. We
also require compliance with the Pets at Home Group’s Code of
Business Ethics and Conduct.
We have undertaken a Group wide risk assessment to highlight
any areas where we may be vulnerable to the risk of modern
slavery and, where necessary, will strengthen our processes in
the areas highlighted. We are also reviewing our supplier due
diligence and audit processes to ensure compliance with the
Modern Slavery Act 2015 (“Act”). In addition, we are updating
our supplier trading terms and Ethical Trading Policy in relation
to the Act.
Should any instances of non-compliance with the Act arise in
relation to any of our suppliers then this will be reviewed and
appropriate action taken.
The Pets at Home Group Plc Board of Directors approved this
statement at a meeting of the Board on 20 April 2016.
Branches outside the UK
The Company has no branches outside the UK.
Auditor
So far as each Director is aware, there is no relevant audit
information of which the Company’s Auditor is unaware. Each
Director has taken all the steps which they ought to have taken
as Directors to make themselves aware of any relevant audit
information (being information that is needed by the Company’s
Auditor in connection with preparing its report) and to establish
that the Company’s Auditor is aware of that information.
This confirmation is given and should be interpreted in accordance
with the provisions of section 418(2) of the Companies Act.
At the AGM on 9 September 2015, KPMG LLP was appointed as
the Company’s Auditor. During the 2015 financial year, a competitive
tender process of audit services was completed in accordance
with the requirements of The Statutory Audit Services for Large
Companies Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities) Order
2014, made by the Competition & Markets Authority.
A resolution is to be proposed at the 2016 AGM for the
reappointment of KPMG LLP as the Auditor of the Group.
Approval of Annual Report
The Strategic Report, Corporate Governance Statement and the
Corporate Governance Report were approved by the Board on
25 May 2016.
Approved by the Board and signed on its behalf by
Louise Stonier
Group Company Secretary
25 May 2016
72
Pets at Home Group PlcAnnual Report and Accounts 2016
Statement of Directors’ Responsibilities
in respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the Annual Report and
the Group and parent company financial statements in accordance
with applicable law and regulations.
Responsibility statement of the Directors in respect
of the annual financial report
We confirm that to the best of our knowledge:
Company law requires the Directors to prepare the Group and
parent company financial statements for each financial year.
Under that law they are required to prepare the Group’s financial
statements in accordance with International Financial Reporting
Standards (“IFRS”) (as adopted by the European Union ("EU"))
and applicable law and they have elected to prepare the parent
company financial statements on the same basis. Under company
law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the
state of affairs of the Group and the parent company and of the
profit or loss of the Group for that period. In preparing each of the
Group and parent company financial statements for each financial
year, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of
the Company and the undertakings included in the consolidation
taken as a whole; and
• the Strategic Report/Directors’ Report includes a fair review
of the development and performance of the business and the
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face.
We consider the Annual Report and Accounts taken as a whole,
is fair, balanced and understandable and provides the necessary
information for shareholders to assess the Group’s position and
performance, business model and strategy.
• make judgements and accounting estimates that are reasonable
Approved by the Board and signed on its behalf by
Ian Kellett
Group Chief Executive Officer
25 May 2016
and prudent;
• state whether they have been prepared in accordance with IFRSs
as adopted by the EU; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy at
any time the financial position of the parent company and enable
them to ensure that its financial statements comply with the
Companies Act. They have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of
the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
Group website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
73
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Governance Report
Corporate governance
Statement of Compliance with UK Corporate Governance Code
The following Corporate Governance Report outlines how the Board
has applied the main principles of good governance as required by
the UK Corporate Governance Code 2014 published in September
2014 by the Financial Reporting Council (the “Code”). The Board
is committed to the highest standards of corporate governance.
Except as noted under the heading Chairman on page 75, the
Board has complied with and intends to continue to comply with
the requirements of the Code.
The Company is reporting to its shareholders on its compliance
with the Code in accordance with the Listing Rules
made by the United Kingdom Financial Conduct Authority under
Part VI of the Financial Services and Markets Act 2000
(as amended from time to time) (“LRs”).
The role of the Board
Division of responsibilities
The Company is led and controlled by the Board which is collectively
responsible for the long term and sustainable performance of the
Group. The roles of Chairman and Group Chief Executive Officer are
separate and clearly defined, with the division of responsibilities
set out in writing and agreed by the Board. The definitions of
the roles are published on the Group’s website (http://investors.
petsathome.com/investors/shareholder-information/governance/
our-committees).
The Board has delegated certain responsibilities to Committees to
assist in discharging its duties and the implementation of matters
approved by the Board as summarised below. The reports of each
of the Committees are set out on pages 82 to 85, 86 to 87 and
88 to 107.
Detailed implementation of matters approved by the Board
and operational day-to-day matters are delegated to the Group
Chief Executive Officer together with the rest of the Executive
Management Team.
74
Matters reserved for Board approval
A formal schedule of matters is reserved to the Board for its
approval, which includes:
• Agreement of the Group’s strategy;
• Changes to the structure and capital of the Group;
• Approval of any decisions to cease to operate all or any material
part of the Group’s business;
• Approval of extension of activities into new businesses or
geographical areas;
• Reviewing the effectiveness of internal controls;
• Approval of financial statements and results announcements;
• Approval of shareholder communications, circulars and Notices
of Meetings;
• Approving significant expenditure, material transactions
and contracts;
• Reviewing and agreeing Group tax and treasury policy;
• Delegation of authority to the Group Chief Executive Officer;
• Board and Senior Management appointments, arrangements
and succession planning;
• Setting of Board Committees’ Terms of Reference; and
• Review of the Group’s overall corporate governance matters.
The separation of responsibilities between the Chairman and the
Group Chief Executive Officer, coupled with the reserved matters
described above, ensures that no individual has unfettered powers
of decision-making.
Board composition
Board balance and independence
The Code recommends that at least half the board of directors
of a UK-listed company, excluding the chairman, should comprise
non-executive directors determined by the Board to be independent
in character and judgement and free from relationships or
circumstances which may affect, or could appear to affect,
the director’s judgement.
The Board currently consists of five Independent Non-Executive
Directors, one Non-Executive Chairman, one non-Independent
Non-Executive Director appointed by the Principal Shareholder and
one Executive Director. The Directors’ biographies are contained
on pages 62 to 63. The Board considers that all of its Non-
Executive Directors are independent in character and judgement
and that both individually and collectively, the Directors have the
range of skills, knowledge, diversity of experience and dedication
necessary to lead the Group and also contribute significantly to
the work of the Board together with the requisite strategic and
commercial experience. More than half of the Directors excluding
the Chairman and the non-Independent Non Executive Director
are considered to be independent in accordance with the Code.
Pets at Home Group PlcAnnual Report and Accounts 2016 Chairman
The Code recommends that, on appointment, the chairman of a
company with a premium listing on the Official List should meet
the independence criteria set out in the Code. Tony DeNunzio
joined Pets at Home in 2010 and has been Non-Executive
Chairman of the Group since March 2010. Notwithstanding that
the Board did not consider at the time of listing, and continue
to believe that Tony DeNunzio does not meet the independence
criteria set out in the Code, the Board believes that Tony should
remain as Non-Executive Chairman of the Group since he brings
vast retail experience and knowledge to the Pets at Home team.
The Directors consider that he exercises his role as Chairman
independently of management and exercises his judgement in
the interests of all shareholders.
Group Chief Executive Officer
The Group Chief Executive Officer (“Group CEO”) is responsible for
the day-to-day management of the Company, and, together with the
Executive Management Team, for executing the strategy, once it has
been agreed by the Board. The Group CEO creates a framework that
optimises resource allocation to deliver the Group’s agreed strategic
objectives over varying timeframes and to ensure the successful
delivery against the financial business plan and other key business
objectives, allocating decision making and responsibilities
accordingly. The Group CEO together with the Executive
Management Team identifies and executes new business
opportunities and potential acquisitions or disposals. The Group
CEO manages the Group with reference to its risk profile in the
context of the Board’s risk appetite. Ian Kellett has recently been
appointed to the role of Group CEO as successor to Nick Wood.
Senior Independent Director
The Code recommends that the board of directors of a company
with a premium listing should appoint one of the Independent
Non-Executive Directors as a Senior Independent Director to
provide a sounding board for the Chairman and to serve as an
intermediary for the other directors when necessary. The role
of Senior Independent Director includes being available to
shareholders if they have concerns, which contact through the
normal channels of the Group CEO has failed to resolve, or for
which such contact is inappropriate. Dennis Millard has been
appointed Deputy Chairman as well as Senior Independent Director
and has considerable experience of acting as an independent
non-executive director on plc boards.
Appointment of Directors by the Principal Shareholder
Pursuant to the Relationship Agreement, the Company has
agreed with the Principal Shareholder that it may appoint two
Non-Executive Directors to the Board for so long as the Principal
Shareholder (and/or any of its associates, when taken together)
holds 20% or more of the voting rights over the Company’s Shares
and one Non-Executive Director to the Board for so long as it
(and/or any of its associates, when taken together) holds 10%
or more but less than 20% over the voting rights in respect of the
Company’s shares. The Principal Shareholder has appointed Brian
Carroll as a Non-Executive Director of the Board. The Chairman,
Tony DeNunzio, is a senior advisor to affiliates of the Principal
Shareholder and therefore is not deemed to be independent of the
Principal Shareholder. Although he has not been appointed as a
Director by the Principal Shareholder, the Principal Shareholder has
agreed that for so long as it has the right to appoint two Directors
to the Board and Tony is a Director, the Principal Shareholder will
not exercise its right to appoint a second Director to the Board.
For further details of the Relationship Agreement and confirmation
of compliance with the provisions set out in the Relationship
Agreement, see page 70 of the Directors’ Report.
Board observers
Each of the Chief Executive Officer of the Retail Division and the
Chief Executive Officer of the Services Division has been appointed
as Board observer with rights to receive notice of (including all
Board papers), attend and speak at, Board meetings. The Principal
Shareholder also has the right to appoint, and has appointed, one
Board observer for so long as it holds voting rights over more than
10% of the Company’s shares. Such Board observers have the
right to receive notice of, attend and speak at, Board meetings.
No Board observer is entitled to vote on any matter requiring a
resolution of the Board.
Appointments
2016 saw changes to the Board in relation to the appointment
of Ian Kellett as Group CEO. The Nomination & Corporate
Governance Committee is utilising independent recruitment
consultants to identify a suitable successor to Ian Kellett as
Chief Financial Officer.
Appointment terms and elections of Directors
All Directors have service agreements or letters of appointment
and the details of their terms are set out in the Remuneration
Report on pages 103 to 104. As announced at the time of his
appointment, the terms of Ian Kellett's service agreement was
amended, upon his appointment as Group CEO, to include a notice
period of six months from the individual and 12 months from the
Company. The service agreements and letters of appointment are
available for inspection at the Company’s registered office during
normal business hours.
At each AGM of the Company all Directors will stand for re-election
in accordance with the Code.
75
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Governance Report continued
Effectiveness
Directors induction and ongoing training
It is important to the Board that Non-Executive Directors have
the ability to influence and challenge appropriately. New Directors
receive a full, formal and tailored induction on joining the Board,
including meeting with the Executive Team and other members of
the Group’s Operating Board and advisors. The induction includes
visits to the Group’s stores, veterinary surgeries and other
operational locations together with training on the Group’s core
values including environmental, social and governance issues.
Individual training needs are reviewed regularly and training is
provided where a need is identified or requested. All Directors
receive frequent updates on a variety of issues relevant to the
Group’s business, including regulatory and governance issues.
Considering diversity
The Board understands the importance of having a diverse
membership and recognises that diversity encompasses not only
gender but also background and experience. Whilst the Board
believes that appointments should be made solely on merit, we
seek to ensure that the Board maintains an appropriate balance
through a diverse mix of experience, backgrounds, skills,
knowledge and insight, to further strengthen the diversity of gender
and experience already on the Board. Notably, two of the five
Independent Non-Executive Directors, Tessa Green and Amy
Stirling, are female together with the Group Company Secretary,
Louise Stonier and the CEO of the Services division, Sally Hopson.
These appointments were made on merit, and not on the basis of
gender, the appointees being by far the strongest candidates for
the positions with their skill sets and overall experience fitting the
objective role description approved by the Board at the outset of
the recruitment process.
This policy applies equally to all appointments in the Company and
so, the most recent appointment to the board of the Pets at Home
Vets Group is female, Fiona Briault.
Board meetings and attendance
In this financial year, the Board met formally ten times, plus the
annual strategy meeting. Ad hoc meetings of both the Board
and Committees were arranged to deal with matters between
scheduled Board meetings as appropriate. Board meetings were
preceded by Committee meetings with the meetings lasting the
majority of the day in most cases.
Topics for the Board meetings are determined at the beginning of
the year and new items are added to this as and when appropriate.
During the year the Board spent its time considering a wide range
of matters. These included:
• Strategy;
• Succession planning;
• Performance overall of individual businesses and functions
in the Group;
• Budgets and long term plans for the Group;
• Financial statements and announcements;
• Reviewing reports from the Committees, notably on audit
strategy, remuneration, succession planning, the Group’s
corporate social responsibility strategy and measures in place
to ensure that Pets Before Profit is maintained as the Company’s
number one value;
• Approving significant items of capital expenditure and contracts,
investments, treasury and dividend policy;
• Approving new acquisitions;
• Shareholder feedback and reports from brokers and analysts;
• Risk management and controls in the Group including
reputational risks; and
• Delegated authorities.
All Directors receive papers in advance of Board meetings via an
electronic board paper system which enables the fast dissemination
of quality information in a safe and secure manner. These include
a monthly Board report with updates from each of the Executive
Team and the Operating Board, which monitors the achievements
of the Group’s key performance indicators, both financial and strategic.
Performance against budget is reported to the Board monthly and
any substantial variances are explained. Forecasts for each half
year are revised and reviewed monthly.
The Group’s Operating Board are also invited to present at Board
meetings so that Non-Executive Directors keep abreast of
developments in the Group.
The Chairman meets regularly with the Non-Executive Directors,
without the Executive Directors present and this practice will
continue in the future. The Senior Independent Director also
attended these sessions.
It is important to the Group that all Directors understand external
views of the Group. Throughout the year, regular reporting is
provided to the Board by the Company’s Head of Investor
Relations, covering broker reports and the output of meetings
with significant shareholders.
76
Pets at Home Group PlcAnnual Report and Accounts 2016
Number of meetings attended
Attendance for all scheduled Board and Board Committee meetings is given in the table below.
Number of meetings1
Director2
Tony DeNunzio (Chairman)
Dennis Millard (Deputy Chairman)
Nick Wood
Ian Kellett
Amy Stirling
Tessa Green
Paul Coby
Paul Moody
Brian Carroll3
Board
10
Remuneration
Committee
5
Audit & Risk
Committee
4
Nomination &
Corporate
Governance
Committee
4
Corporate
Social
Responsibility
Committee
2
Pets
Before Profit
Committee
2
10
10
9
10
10
10
9
10
10
–
5
–
–
5
5
–
5
–
–
4
–
–
4
–
3
4
–
4
4
–
–
4
4
4
4
3
2
2
–
–
–
2
2
–
–
2
2
–
–
–
2
2
–
–
1 Excludes the strategy day which all Directors attended.
2 Only attendance of formal members of the meetings is included. Attendance as an observer is not included.
3 Includes attendance either in person or via his alternate, Nicolas Gheysens, appointed under the Relationship Agreement.
Board Committees
The Board has established three Board Committees: an Audit
& Risk Committee, a Nomination & Corporate Governance
Committee, and a Remuneration Committee. In addition, the
Board has also established the Pets Before Profit Committee and
the Corporate Social Responsibility (“CSR”) Committee which
comprise both Non-Executive Directors and colleagues and the
Investment Committee which comprises Executive Directors and
colleagues (including a Senior Executive). If the need should arise,
the Board may set up additional committees as appropriate.
Each Committee has written terms of reference which are approved
by the Board and subject to review each year. These are available
on request from the Group Company Secretary and are published
on the Group’s website (http://investors.petsathome.com).
Audit & Risk Committee
The Audit & Risk Committee gives due consideration to laws and
regulations, the provisions of the Code and the requirements of
the LRs.
The Code recommends that an audit committee should comprise
at least three members who are Independent Non-Executive
Directors and that at least one member should have recent
and relevant financial experience. The Audit & Risk Committee
is chaired by Amy Stirling, and its other members are Dennis
Millard, Paul Coby and Paul Moody, all of whom are Independent
Non-Executive Directors. As a former chief financial officer of
TalkTalk Telecom Group Plc, the Directors consider that Amy
Stirling fulfills the requirement under the UK Corporate Governance
Code that one member of the Committee has recent and relevant
financial experience.
The Audit & Risk Committee meets not less than three times
a year.
Only Committee members have the right to attend and vote at its
meetings but the Principal Shareholder has a right to appoint an
observer to attend meetings of the Audit & Risk Committee for so
long as it (and/or any of its associates, when taken together) holds
10% or more of the voting rights in respect of the Company’s Shares.
The Audit & Risk Committee chair will be available at the 2016
AGM to respond to questions from shareholders on the activities
of the Audit & Risk Committee.
77
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Governance Report continued
The Audit & Risk Committee has taken appropriate steps to ensure
that the Company’s Auditors are independent of the Company and
obtained written confirmation from the Company’s Auditors that
they comply with guidelines on independence issued by the
relevant accountancy and auditing bodies.
Nomination & Corporate Governance Committee
The Nomination & Corporate Governance Committee assists
the Board in considering the structure, size and composition
of the Board whilst advising on succession planning.
The Audit & Risk Committee has access to sufficient resources
to carry out its duties, including the services of the Group Legal
Director and Group Company Secretary and the Group’s internal
audit function. Independent external legal and professional advice
can also be taken by the Audit & Risk Committee if it believes it
necessary to do so.
The Audit & Risk Committee Report on pages 82 to 85 describes
the role and activities of the Committee.
Remuneration Committee
The Remuneration Committee assists the Board in determining
its responsibilities in relation to Directors’ remuneration.
The Code provides that a remuneration committee should comprise
at least three members who are Independent Non-Executive
Directors (other than the chairman). The Remuneration Committee
is chaired by Paul Moody, and its other members are Tessa Green,
Amy Stirling and Dennis Millard, all of whom are Independent
Non-Executive Directors. The Remuneration Committee meets not
less than twice a year. Non-Executive Directors' and the Chairman’s
fees are determined by the full Board.
Only Committee members have the right to attend and vote at its
meetings, but the Principal Shareholder has a right to appoint an
observer to attend meetings of the Remuneration Committee for so
long as it (and/or any of its associates, when taken together) holds
10% or more of the voting rights in respect of the Company’s shares.
The Remuneration Committee has access to sufficient resources
to carry out its duties, including the services of the Group Legal
Director and Group Company Secretary. Independent external legal
and professional advice can also be taken by the Remuneration
Committee if it believes it necessary to do so.
The Code recommends that a majority of the members of a
nomination committee should be Independent Non-Executive
Directors. The Nomination & Corporate Governance Committee
is chaired by Tony DeNunzio, and its other members are Dennis
Millard, Paul Coby, Tessa Green, Amy Stirling (each of whom is
an Independent Non-Executive Director), and Brian Carroll. The
Nomination & Corporate Governance Committee meets not less
than once a year.
The Nomination & Corporate Governance Committee has access
to sufficient resources to carry out its duties, including the
services of the Group Legal Director and Group Company
Secretary. Independent external legal and professional advice
can also be taken by the Nomination & Corporate Governance
Committee if it believes it necessary to do so.
Further details of the role of and the activities of the Committee
can be found on pages 86 to 87.
Other Pets at Home Committees
Pets Before Profit Committee and Corporate Social
Responsibility Committee
The Pets Before Profit Committee and the Corporate Social
Responsibility (“CSR”) Committee advise the Board on the Group’s
corporate responsibility objectives and strategy. Further details of
the work carried out by these Committees is contained in the CSR
Committee Report on pages 44 to 59. CSR is embedded in the
Group’s strategy with the number one value being Pets Before Profit.
The Pets Before Profit Committee and the CSR Committee are
chaired by Tessa Green, and its other members are Tony
DeNunzio, Dennis Millard and Paul Coby. A number of the Group’s
colleagues (including members of the Executive Management
Team) are also regularly invited to attend meetings of the Pets
Before Profit and CSR Committee.
Pages 88 to 107 of the Annual Report on Remuneration
summarise the role and activities of the Committee.
The Pets Before Profit Committee and the CSR Committee meet
formally at least twice a year and otherwise as may be required.
Only Committee members have the right to attend and vote at its
meetings but the Principal Shareholder has a right to appoint an
observer to attend meetings of the Pets Before Profit Committee
and CSR Committee for so long as it (and/or any of its associates,
when taken together) holds 10% or more of the voting rights in
respect of the Company’s shares.
78
Pets at Home Group PlcAnnual Report and Accounts 2016 Management Committees
Details of our management committees are set out below:
Investment Committee
The Investment Committee assists the Board with the Group’s
store and veterinary surgery rollout process to ensure the Group’s
investment process is managed effectively and rigorously throughout
the Group. The Investment Committee is chaired by Ian Kellett and
its other members are Sally Hopson and Peter Pritchard. A number
of the Group’s colleagues are entitled to attend meetings of the
Investment Committee as observers including the Director of
Property, the Group Development Director and the Vet Group
Partner Recruitment, Property and People Director.
The Investment Committee meets formally at least ten times a
year and otherwise as may be required. Duties of the Investment
Committee include reviewing and considering all proposals
presented for new store and standalone surgery acquisitions by a
Group company, approving all material variations to proposed new
stores and standalone surgery acquisitions, periodically reviewing
proposed changes to the reporting and presentation of new store
investment criteria; reviewing all proposals presented for lease
renewals and reviewing alternative strategies for new store
investment, formats and geographical markets and reporting on
such strategies to the Board for final approval on the terms of any
such matter, and reviewing all proposals for the dispositions of
all or part of any of the lease on stores including any sub-letting,
assignments, surrenders or relocations and approve or reject any
such proposals as appropriate. Each of the matters approved by
the Investment Committee is subject to the further approval of
the Board where it falls within the level of expenditure requiring
full Board approval. The Investment Committee formally updates
the Board at least once a year in addition to regular updates on
matters approved within the monthly Board packs.
Senior Executive and Operating Board
In addition to the Board, the Group has both the Executive
Management Team as detailed in the Governance Report on pages
64 and 65 and the Operating Board (the “Operating Board”) for
which respective roles are clearly defined. The Operating Board
meets frequently to discuss the following:
• Current trading;
• New developments;
• Operational issues;
• Marketing;
• People; and
• Execution of strategic programmes.
Health and safety
Health and safety is a key priority for the Board and senior
management and is an item for review and discussion at each
Board meeting. The Board has established a health and safety
committee that meets at least on a quarterly basis and is chaired
by the Group Legal Director and Company Secretary with the
agenda led by the Group Head of Health and Safety. The committee
is attended by key individuals in the business that are responsible
for certain areas of health and safety including the veterinary
business, retail and grooming and the committee is tasked with
reviewing the Group’s overall health and safety performance.
A health and safety policy is in place for the Group which is
reviewed on a regular basis.
The Distribution centres have their own dedicated health and
safety manager and a separate health and safety sub-committee
which also meets on a regular basis. The veterinary business also
has a designated health and safety manager and two health and
safety assessors.
Further details of the work of the health and safety committee
are contained on page 50 of our CSR Report.
Internal control and risk management
The Board is responsible for the Group’s system of internal
control and for reviewing its effectiveness and has carried out
a robust assessment of the principal risks facing the Group
including those that would threaten its business model, future
performance, solvency or liquidity as detailed on pages 38 to
43 of the Strategic Report. The Board delegates to the Executive
Team the responsibility for designing, operating and monitoring
these systems. The systems are based on a process of identifying,
evaluating and managing key risks and include the risk management
processes set out on pages 38 to 43 of the Strategic Report and
page 84 of the Audit & Risk Committee Report.
79
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Governance Report continued
The systems of internal control were in place throughout the period
and up to the date of approval of the Annual Report. The systems
of internal control are designed to manage rather than eliminate
the risk of failure to achieve business objectives. They can only
provide reasonable and not absolute assurance against material
errors, losses, fraud or breaches of law and regulations. A number
of internal controls operate across the business. The key controls
the business relied upon during the year are set out below:
• The annual Group wide strategic review of the business took
place in October and November 2015 culminating in the preparation
of a detailed three year strategic plan which was reviewed and
approved by the Board. Following this approval, the business
carried out its annual budget cycle, again culminating in formal
review and approval by the Board.
• Management accounts have been reviewed at meetings of the
Board. These reviews covered the comparison of actual
performance against budget in the period end management
accounts and consideration of outturn for the year. The period end
accounts are prepared by the management accounts team and
reviewed by the Chief Financial Officer and the Finance Director.
• All capital investments during the year have been approved by
the Chief Financial Officer; an authority framework is in place which
details the approvals required for specific levels of capital spend
including those capital projects requiring full Board approval. In line
with delegation by the Board, the Investment Committee, chaired by
the Group CEO, has reviewed and approved investments in respect
of the acquisition and fit-out of new stores and new standalone
veterinary practices; see page 23 for further details.
• The business plans for each new company acquisition namely
the acquisition of Northwest Surgeons Limited, Anderson Moores
Veterinary Specialists Limited, Eye Vet Limited and Dick White
Referrals Limited have been reviewed and approved by the
Board prior to acquisition following internal review and approval.
• There is an internal audit department in place that has its scope
agreed with the Audit & Risk Committee and has reported at
each Audit & Risk committee throughout the year. All internal
audit reports are presented to the Audit & Risk Committee for
review and consideration of any material findings. Where audit
findings have been raised, management have agreed appropriate
actions and these are prioritised based on risk. Further details
of the areas covered in the internal audit reports can be found
in the Audit & Risk Committee report on page 84.
• A clearly articulated delegated authority framework in respect
of all purchasing activity is in place across the Group. This is
complemented by systemic controls including a contract approval
policy that reflect the agreed authority framework and clear
segregation of duties between relevant functions and departments.
• A schedule of matters reserved for the Board is in place for approving
significant transactions and strategic and organisational change.
• Board discussion of the key risks and uncertainties facing the
Group and the risk management system together with deep dives
on a number of key risk areas. Further details are contained in
the Audit & Risk Committee report on page 84.
Directors’ conflicts of interest
The Articles of Association of the Company give the Directors the
power to consider and, if appropriate, authorise conflict situations
where a Director’s declared interest may conflict or does conflict
with the interests of the Company.
Procedures are in place at every meeting for individual Directors
to report and record any potential or actual conflicts which arise.
The register of reported conflicts is reviewed by the Board at least
annually. The Board has complied with these procedures during
the year.
Two potential conflicts of interest were reported in the year ended
31 March 2016 in circumstances where the Non-Executive
concerned was neither directly nor indirectly involved in any
potential dealings between the Group and the company concerned.
The conflicts were authorised by the Board with appropriate
safeguards being put in place.
Whistleblowing Policy
The Company has a duty to conduct its affairs in an open and
responsible way. We are committed to high standards of corporate
governance and compliance with legislation and appropriate codes
of practice. By knowing about any wrong doing or malpractice at an
early stage, we stand a good chance of taking the necessary steps
to stop it. We have a policy in place that is designed to encourage
colleagues to identify such situations and report them without fear
of repercussions or recriminations provided that they are acting
in good faith. The policy sets out how any concerns may be raised
and when a response can be expected from the Company and
in what timescales. A copy of the Group’s Code of Ethics and
Business Conduct is published on the Group’s website
(http://investors.petsathome.com/investors/shareholder-
information/governance/code-of-ethics-and-business-conduct).
This policy and the procedures in place to deal with concerns
raised under the policy were reviewed by the Audit & Risk
Committee during the year.
Share dealing code
The Company has adopted a share dealing code in relation to its
shares that is based on, and is at least as rigorous as, the Model
Code as published in the LRs. The share dealing code applies to
the Company’s Directors, its other PDMRs and certain employees
of Group companies and they are responsible for procuring the
compliance of their respective connected persons with the
Company’s share dealing code.
80
Pets at Home Group PlcAnnual Report and Accounts 2016 Board evaluation and effectiveness
Process
Despite undertaking an external review in 2015, since the Company
is still undergoing the transition from a private company to a public
limited company, the Board decided to repeat the external evaluation
exercise and engaged Lintstock Limited (“Lintstock”) to undertake an
independent evaluation of Board and Board committee performance
and to identify areas where the performance and procedures
of the Board might be further improved. Lintstock is a specialist
corporate governance consultancy and has no commercial
dealings or other connection with the Group.
The assessment included the completion of a short form online
questionnaire that considered topics covered in the 2015
evaluation under the headings:
• Board Composition Expertise and Dynamics;
• Time Management and Board Support;
• Board Committees;
• Strategic and Operational Oversight;
• Risk Management and Internal Control;
• Succession Planning and Human Resource Management; and
• Priorities for Change.
All respondents were then interviewed by Lintstock during which
their responses to the questionnaire were reviewed. The anonymity
of all respondents was ensured throughout the process in order to
promote the open and frank exchange of views.
Outputs of the evaluation
At a dedicated Board session, a report of the findings of the evaluation
and its recommendations were discussed and specific actions agreed.
Overall, the areas highlighted from last year’s evaluation were seen to
have improved considerably since the last review and the top priorities
for the Board over the coming year were identified as:
• The Non-Executive Directors continuing to engage with the
business and develop the Board’s understanding of Pets at Home;
• Supporting the new management structure and those in new roles;
• Reducing and focusing the meeting agendas;
• Improving the quality of the Board packs; and
• Ensuring that the people strategy is brought to the Board.
Beyond the annual evaluation, the performance of the Group CEO is
continuously monitored throughout the year by the Chairman and the
Senior Independent Director.
Relations with shareholders
The Board’s primary role is to promote the success of the
Company and the interests of shareholders. The Board is
accountable to shareholders for the performance and activities
of the Group.
The Board believes it is important to explain business
developments and financial results to the Company’s shareholders
and to understand any shareholder concerns. We communicate
with shareholders on a regular basis.
The Board communicates with its shareholders in respect of the
Group’s business activities through its Annual Report, yearly and
half yearly announcements, interim management statements and
other regular trading statements. This information is also made
publicly available via the Company’s website.
During the year, the Company met regularly with analysts and
institutional investors and such meetings will continue. The Group
CEO and Chief Financial Officer have lead responsibility for investor
relations. They are supported by a dedicated Head of Investor
Relations who, amongst other matters, organises presentations
for analysts and institutional investors and ensures that
procedures are in place to keep the Board regularly informed
of such investors' views.
All the Non-Executive Directors are available to meet with major
shareholders if they wish to raise issues separately from the
arrangements as described above and, during the year, the
Chairman and Senior Independent Director held such meetings
and reported back to the Board.
The CSR Committee Report on page 46 also details the materiality
assessment survey that was carried out during the year with
investors and customers in relation to environment, social and
governance issues.
Pets at Home’s investor website is also regularly updated with
news and information including this Annual Report and Accounts
which sets out our strategy and performance together with our
plans for future growth (http://investors.petsathome.com).
Annual General Meeting
The Company’s Annual General Meeting (“AGM”) will be held on
Wednesday, 14 September 2016 at Macdonald Manchester Hotel
& Spa, London Road, Piccadilly, Manchester, Greater Manchester,
United Kingdom, M1 2PG. Full details of the meeting are set out
in the Notice of Annual General Meeting sent with this Annual
Report and Accounts. The AGM provides all shareholders with the
opportunity to attend and vote on the resolutions put to shareholders
and those shareholders unable to attend are encouraged to vote
using the proxy card enclosed with this Annual Report and Accounts
or electronically by following the instructions set out in the Notice
of Meeting (whether personally or by proxy). All resolutions proposed
at the AGM will be taken on a poll vote. This follows best practice
guidelines and enables the Company to count all votes, not just
those of shareholders who attend the meeting. Information relating
to votes cast will, following the AGM, be available on the Company’s
website (http://investors.petsathome.com).
81
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Audit & Risk Committee Report
Amy Stirling
Chairman of the Audit & Risk Committee
Who is on the Audit & Risk Committee?
Member
Amy Stirling (Chairman)
Dennis Millard
Paul Coby
Paul Moody
Introduction
I am pleased to present the Audit & Risk Committee’s Report for
the year. Our primary function is to assist the Board in fulfilling
its responsibilities to protect the interests of the shareholders
with regard to the integrity of the financial reporting, the adequacy
and effectiveness of the risk management systems and internal
controls, the effectiveness of the internal audit function and the
relationship with the external auditors.
No. of meetings
4/4
4/4
3/4
4/4
During the year the Committee met four times with our agenda
covering financial reporting considerations, progress against
the internal audit plan and the external audit process. We have
considered risk regularly throughout the year, reviewing updates
to the Group risk register and conducting ‘deep dives’ with
management into specific key risks.
In addition to our regular agenda, this year we have considered
financial reporting control processes, reviewed and challenged the
LTVS before its assessment by the Board, and discussed external
audit effectiveness following the tender process conducted last
year. With management, we have conducted ‘deep dives’ into key
business risks, such as the implementation of a new payroll and HR
system to improve support provided to our colleagues in Health and
Safety, in understanding and improving the working environment,
and in Information Security, given the increased awareness of the
challenges all businesses face in keeping data safe.
Committee members
The Audit & Risk Committee (“the Committee”) members have
been selected to provide a wide range of financial and commercial
experience necessary to fulfil the duties and responsibilities of
the Committee. The Board considers the Committee members’
financial experience to be recent and relevant for the purpose
of the Code. Further details of the members can be found in
the Board of Directors on pages 62 to 63.
The Chief Financial Officer, the Group Chief Executive Officer, the
Head of Internal Audit and an observer appointed by the Principal
Shareholder also attend Committee meetings by invitation,
together with representatives from KPMG. In addition, this year,
as the Chief Financial Officer’s responsibilities expanded to include
the Chief Executive Officer of Retail role, the Director of Finance
and the Chief Financial Officer of the Vets Group have also
attended the Committee meetings. The Group Company Secretary
acts as secretary to the Audit & Risk Committee.
What we did in 2016
Reviewed updates to the financial accounting framework
in which the Group operates and how this may affect the
financial statements.
Received a whistleblowing and code of ethics update.
In addition to our work ensuring that the going concern basis
is appropriate, we have this year reviewed and challenged the
Longer Term Viability Statement ("LTVS") in advance of its
approval by the Board. As part of this work, the carrying value
of the goodwill balance has been reviewed.
All businesses continue to be exposed to cyber and information
security risks and this has been a key focus of the Committee
this year.
We have performed ‘deep dives’ on a number of key risks
together with management to ensure that all possible mitigating
actions are identified and implemented.
Reviewed the Terms of Reference for the Committee.
What we will do in 2017
Continue to carry out our responsibilities as set out in the Terms
of Reference, including monitoring the integrity of the Group’s
financial statements, challenging the judgemental areas
contained within the financial statements and advising the Board
on whether external reporting is fair, balanced and reasonable.
As the Group moves forward with further investment in systems,
we will continue to monitor the controls around the investment in
and delivery of key IT initiatives, as well as continuing to review
controls around cyber security in this increasingly complex area.
We will continue to monitor the effectiveness of the Group’s
Internal Audit function. We will agree an Internal Audit strategy
for FY17 and beyond, defining ways of working as well as specific
projects. We expect to review each of the top risks in a ‘deep
dive’ during the year.
We will document in further detail the controls and processes
within the Vets Group, focusing in particular on the integration
of the recent acquisitions.
82
Pets at Home Group PlcAnnual Report and Accounts 2016 We have devoted significant time
during the year to reviewing the
Group’s risk management systems.”
The Chairman of the Committee also meets throughout the year
with the Chief Financial Officer, Director of Finance, Chief Financial
Officer of the Vets Group and the Head of Internal Audit to discuss
ongoing matters.
The Committee meets separately with the Head of Internal Audit
and the Group’s external auditors without management present
during the year.
Financial Reporting
As part of our ongoing work to ensure the integrity of financial
reporting, during the year, we have focused on the following:
• Reviewed the appropriateness of the Annual Report for the
year ended 31 March 2016 (which is a 53 week period), and
the interim financial statements for the 28 week period ended
8 October 2015 with a focus on, amongst other matters, the
quality and acceptability of accounting policies and procedures,
material areas where judgement has been applied and clarity
of disclosures in accordance with financial reporting standards.
Following these reviews we believe that the Annual Report is
fair, balanced and understandable.
• Revisited and refreshed work undertaken in 2014 to ensure
that our financial procedures and controls are adequate for the
size and complexity of the business. Although there are no
significant changes in the financial control framework since the
work was originally completed, the Vets Group business has
become a larger part of the Group and is therefore subject to
incremental controls.
Financial statement reporting issues
The Committee has carefully considered the key judgements
applied in the preparation of the consolidated financial
statements. The Committee considers the key risks within
the financial statements to be the carrying value of goodwill
and the carrying value of inventory. KPMG have also identified
these areas as key audit risks when planning their audit.
During the year the Committee has:
• Reviewed management’s work on testing the goodwill balance
for impairment and reviewed and challenged the forecasts,
assumptions, sensitivities and stress tests used in this work;
• Gained confidence regarding the valuation of inventory through
our work on financial control processes and the implementation
of the new JDA warehouse management system together with the
review each period of the management information regarding
inventory balances.
To further monitor the integrity of the financial statements and
results we have also:
• Received an update from management as to the process for
recognising income from suppliers. As reported last year, this is
recognised in a prudent manner reflecting the activity performed
by suppliers and the level of confidence in any performance
related criteria. As a result, we consider supplier income to
be recognised appropriately in the financial statements;
• Reviewed the Group’s policies on tax and treasury. The treasury
policy, which has not changed significantly in the year, covers
our transactions with banks and other financial institutions and
includes the level of hedging that the Group has in place,
particularly on interest rates and foreign currencies. The tax
policy, which outlines the Group’s attitude to tax and risk, our
relationship with HMRC and relationships with external tax
advisors, have not changed significantly in the year, however,
we receive frequent updates on each of corporate tax,
VAT and employment taxes across the Group;
• Reviewed and discussed with management changes in the
financial reporting landscape currently being considered, in
particular, leasing, revenue recognition and financial instruments.
The proposed standard IFRS 16 “Leases” will have the greatest
impact on the presented financial position of the Group and an
initial impact assessment has been carried out.
Going concern and longer term viability
Our work expanded this year in line with the requirements
of the 2014 UK Corporate Governance Code to incorporate a
comprehensive review of the process to underpin the longer term
viability statement in addition to our regular review on going
concern. In considering viability overall, the Committee reviewed
the Group’s three year Strategic Plan with particular focus on the
key assumptions in relation to revenue and our store and service
expansion plans. Sensitivities to these key assumptions were
also reviewed based on the impact of the Group’s key risks,
individually and conflated, as set out on pages 38 to 43.
Following an iterative process of review of the detailed
considerations set out above by the Committee and the
Executive Management team, the Committee is satisfied that
it is appropriate for the Group to continue to adopt the going
concern basis in preparing the Annual Report and Accounts
of the Group and, further, that the longer term viability statement
on page 71 of the Directors’ Report is appropriate.
83
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Audit & Risk Committee Report continued
Risk management and internal controls
Risk management and the system of internal control are the
responsibility of the Board. It ensures that there is a process in
place to identify, assess and manage significant risks that may
affect achievement of the Group’s objectives and that the level
and profile of such risks is acceptable. The Committee provides
oversight and challenge to the assessment of principal risks as
set out on pages 38 to 39. The Group’s key risks and uncertainties
are set out on pages 40 to 43.
Specific work performed during the year in our key risk areas
included an audit of pet welfare processes as part of Brand and
Reputation, under Business Systems and Information Security,
internal audit carried out work on the implementation of a new
Group HR & payroll system, a review of VIP management
information and a post implementation review of the new JDA
warehouse management system. Under our Regulatory and
Compliance risk, work was conducted through a review of
Customs Duty and VAT disclosures.
Following the review of risk management processes last year, the
Committee now performs regular ‘deep dives’ into the Group’s key
risks. Members of the Executive Management Team attend the
Committee and set out the background and nature of the specific
risk area along with the mitigations that are in place, any planned
future actions and an assessment of the remaining level of risk.
During the year, reviews were conducted on Information Security,
Health and Safety and the implementation process of a new Group
HR and Payroll system.
Internal audit
The internal audit function has a direct line of report into the
Committee and is an important part of the assurance process
within the business. The Committee reviews and approves the
internal audit plan for the year which is developed to address key
risks across the business as well as reviewing core governance,
financial and commercial processes.
The Head of Internal Audit and Risk has attended each Committee
meeting, updating on progress against the audit plan throughout
the year, and reporting on findings from the reviews carried out and
progress against any mitigating actions.
All reports, related findings and recommended actions have been
discussed by the Committee and are tracked to completion.
External audit
KPMG presents their Audit Plan, Risk Assessment and audit findings
to the Committee, identifying their consideration of the key audit
risks for the year and the scope of their work. These reports are
discussed throughout the audit cycle. As in the prior year, these risks
were considered to be the carrying value of goodwill and the carrying
value of inventory. In their reports presented to the Committee at
both the half year and full year, the auditors considered these risks
to be appropriately addressed and raised no significant areas of
concern in these or any other areas of their review.
KPMG also attend the Committee meetings and meet separately,
without management present, to discuss any issues in detail.
Audit tendering
The Statutory Audit Service Order 2014 (The Order) requires that
audit firms are rotated every ten years unless there is a tender, in
which case, the audit firm can remain in position for 20 years. We
are in compliance with The Order and performed a tender process
which concluded in January 2015. Following this tender process
KPMG, who have audited the Group since 2000, were reappointed
as auditors at the 2015 Annual General Meeting.
84
Pets at Home Group PlcAnnual Report and Accounts 2016 External auditor’s effectiveness
During the year, the Committee considered the effectiveness,
independence and objectivity of the external auditors through the
review of all reports provided, regular contact and dialogue both
during Committee meetings and separately without management.
In addition, this year, we conducted an audit effectiveness review
through a questionnaire to Committee members, the results of
which were discussed with KPMG.
Following the audit tender process in the previous financial year,
we appointed Ernst & Young LLP as tax advisors to the Group,
while KPMG continue to provide tax support services to the Joint
Venture partners.
Resolutions to re-appoint KPMG as auditors and to authorise the
Directors to agree their remuneration will be put to shareholders at the
Annual General Meeting that will take place on 14 September 2016.
Maintaining the objectivity and independence of the external auditors
is essential. Additional non-audit services provided by the auditors
may impair their independence or give rise to a perception that their
independence may be impaired. Accordingly, a formal policy, based
on the Auditing Practices Board’s Ethical Standard No. 5 ‘Non-audit
services provided to audited entities’, has been adopted to provide
clarity over the type of work that is acceptable for the external
auditors to carry out and the process required for approval.
Audit and non-audit fees paid to KPMG in the year total £231,000
and an analysis is presented in note 3 to the consolidated financial
statements on page 130. Audit fees across the Group were
£173,000, with KPMG also receiving £35,000 for the review of the
interim financial statements and an additional £23,000 for tax
compliance and advisory services.
In addition to the above KPMG provide audit and non-audit
services to the joint venture practices and received £365,000
in respect of audit fees and £154,000 in respect of tax
compliance fees.
Amy Stirling
Chairman, Audit & Risk Committee
25 May 2016
85
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Nomination & Corporate Governance Committee Report
Tony DeNunzio
Chairman of the Nomination
& Corporate Governance Committee
Who is on the Nomination & Corporate
Governance Committee?
Member
Tony DeNunzio (Chairman)
Dennis Millard
Tessa Green
Amy Stirling
Paul Coby
Brian Carroll
Introduction
As Chairman of the Nomination & Corporate Governance
Committee (the Committee), I am pleased to present the
report of the Committee for the year ended 31 March 2016.
The Committee is a key committee of the Board whose role
is to keep the composition and structure of the Board and its
committees under review and has responsibility for nominating
candidates for appointment as Directors to the Board having
regards to its structure, size and composition (including the
skills, knowledge, experience and diversity of its members).
No. of meetings
4/4
4/4
4/4
4/4
4/4
3/4
What we did in 2016
Reviewed succession plans for executive appointments.
Considered and recommended to the Board a number of
appointments including the appointment of Ian Kellett as Group
Chief Executive Officer following the resignation of Nick Wood.
Reviewed the Board Evaluation and Effectiveness survey.
Considered Directors' conflicts of interest.
What we will do in 2017
Continue to assess the Board composition and how it may
be enhanced.
Continue the recruitment of a replacement Chief Financial
Officer and recommend an appointment to the Board.
Implement further reviews and assessment of
succession planning.
We are also tasked with ensuring that succession plans are
in place for the Directors, the Executive Management Team and
the Group’s Operating Board taking into consideration the current
Board structure, the leadership requirements of the Group and
the wider commercial and market environment within which the
Group operates.
How the Committee discharged its responsibilities in FY16
Succession planning
We reviewed the succession plans for both executive appointments
to the Board and the Executive Management Team, taking into
account the strategic objectives of the Group. The process included
consideration of the anticipated demands of the business and
the skills required to successfully deliver against these. With the
assistance of the Committee, the Board also discussed succession
planning for the Group’s Operating Board. The Board recognises
that effective succession planning is fundamental to the success
of the Company and that ensuring the continued development of
talented colleagues helps to mitigate the risks associated with
unforeseen events, such as key individuals leaving the business.
Considerable progress has been made on succession planning
in this area, however, the Board recognises that more work is
required and further reviews will take place this year.
As a result of the review, at the start of the financial year, the
Company created a divisional operating structure based around
Retail and Services and to support the changes, the Committee
considered and recommended to the Board the appointment
of Ian Kellett as Chief Executive Officer (Group CEO) of the Retail
Division and Sally Hopson as Chief Executive Officer of the Services
Division. The Board approved the appointments with effect from
4 June 2015.
86
Pets at Home Group PlcAnnual Report and Accounts 2016
Keeping the composition and structure of
the Board and its Committees under review
to ensure it has an appropriate balance
of skills, experience and independence.”
Following the resignation of Nick Wood in March this year, the
Committee further reviewed and recommended to the Board
the appointment of Ian Kellett as Group Chief Executive Officer
(Group CEO). As a consequence of Ian’s appointment as Group
CEO, Peter Pritchard was recommended to the Board for promotion
to the role of Chief Executive Officer of the Retail Division following
his successful tenure as Chief Operating Officer in that division.
The appointments were in line with the succession plan that the
Committee had been considering for some time and were
approved by the Board from 4 April 2016. Sally Hopson remains
Chief Executive Officer of the Services Division and Louise Stonier
as Group Legal Director and Company Secretary.
The search for a Chief Financial Officer continues following the
mutual agreement that the original candidate would not be joining
the Company and we have engaged external recruitment consultants.
In the interim, we have considered and recommended to the Board
that Mark Adams be appointed as interim Chief Financial Officer
for the Group. Mark has significant public company experience
as a Chief Financial Officer at Easyjet Plc, Helphire plc and Alpha
Airports Group Plc and more recently has fulfilled the CFO role at
Cognita. He was appointed on 18 April 2016 and will attend Board
meetings as an observer.
Board evaluation and effectiveness
The Company is still undergoing the transition from a private
company to a public limited company, and the Board therefore
decided to repeat the external evaluation exercise and engaged
Lintstock Limited (“Lintstock”). Lintstock performed an
independent evaluation of Board and Board committee
performance and identified areas where the performance and
procedures of the Board might be further improved. Lintstock
is a specialist corporate governance consultancy and has no
commercial dealings or other connection with the Group.
The assessment included the completion of a short form online
questionnaire that considered topics covered in the 2015 evaluation.
A report on the performance of the Board and each of the principal
committees was compiled by Lintstock and presented to the Board
and each relevant committee as a basis for discussing and agreeing
appropriate actions for the forthcoming year. The Chairman and
the Non-Executive Directors also meet in the absence of the
Executive Directors.
The Board and individual committees considered the output from
the review in April 2016 and concluded that the performance of
the Board, its committees and individual Directors was effective.
Any areas for improvement have been agreed by the Board and
are detailed on page 81 of the Governance Report.
Diversity
We take into account a variety of factors before recommending any
new appointment to the Board, including relevant skills to perform
the role, experience, knowledge, ethnicity and gender. The most
important priority of the Committee, however, is ensuring that the
best candidate is selected to join the Board. Further details on
Board diversity can be found on page 76 of the Governance Report.
Conflicts of interest
The Board has delegated authority to the Committee to consider,
and where necessary authorise, any actual or potential conflicts of
interest arising in respect of the Directors. We considered potential
conflicts of interest as they arose during the course of the year.
We also support the Board in its annual consideration of the
Conflicts of Interest Register, which is carried out prior to the
publication of the Annual Report, and considers the independence
of the Non-Executive Directors, in the context of the criteria set
out in the Code.
I will be available at the AGM to answer any questions on the work
of the Nomination & Corporate Governance Committee.
Tony DeNunzio
Chairman
Nomination & Corporate Governance Committee
25 May 2016
87
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Remuneration Report
Paul Moody
Chairman of the Remuneration Committee
Who is on the Remuneration Committee?
Member
Paul Moody (Chairman)
Dennis Millard
Tessa Green
Amy Stirling
No. of meetings
4/4
4/4
4/4
4/4
What we did in 2016
Carried out a review of the Group’s remuneration practice to
ensure in line with best practice.
Made recommendations to the Board on the remuneration
for each of the Group Chief Executive Officer, Chief Executive
Officers of the Retail Division and the Services Division and the
Group Legal Director and Company Secretary and approved any
resulting changes to service agreements.
Reviewed the performance of the Group’s long term incentive
plans and approved awards to colleagues in the Group.
Made recommendations to the Board on the remuneration
for a replacement Chief Financial Officer; and the interim
Chief Financial Officer.
Agreed the annual bonus targets for the Executive Management
Team for FY16 and measured performance against them.
What we will do in 2017
Review and approve the vesting of any Matching Awards
under the Co-Investment Plan for Early Leavers.
Approve the granting of awards under the Group’s Long Term
Incentive Plans.
Review the Remuneration Policy for approval at the 2017
Annual General Meeting of the Company.
Agree the annual bonus targets for the Executive Management
Team for FY17 and measure performance against them.
Review the remuneration for each of the Executive
Management Team.
Make recommendations on the remuneration for a
replacement Chief Financial Officer.
88
Introduction
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 March 2016.
The Remuneration Policy was approved by our shareholders at
our 2014 AGM. There are no changes to the Policy approved in
2014, however, for ease of reference, this is set out in full for
shareholders’ information on pages 98 to 107. The report
is therefore split into two parts.
• Our Annual Report on Remuneration, outlining how our
Remuneration Policy was implemented in FY16 and how
we intend to apply it for FY17. This will be subject to an
advisory vote at our 2016 AGM.
• A recap of our Remuneration Policy, as approved by shareholders
at the 2014 AGM. No changes have been made to our
Remuneration Policy this year and as such there will be no
resolution on our Remuneration Policy at the 2016 AGM.
Remuneration principles
Our Remuneration Policy recognises the importance of attracting
and retaining high-quality talent with the skills and expertise
necessary to support, deliver and drive our strategy. The
Remuneration Committee ("Committee") remains focused on
paying for performance and aligning rewards of the Executive
Management Team with the interests of long term shareholders,
whilst staying true to our Company values and recognising the
importance of widespread colleague share ownership.
Overview of the work of the Committee in FY16
The past year has been a significant and busy year for the Group
with a number of key changes including:
• the creation of a divisional operating structure based around
Retail and Services, with the appointment of Ian Kellett as
Chief Executive Officer of the Retail Division and Sally Hopson
as Chief Executive Officer of the Services Division;
• the subsequent appointment of Ian Kellett as Group Chief Executive
Officer ("Group CEO") following the resignation of Nick Wood;
• the subsequent promotion of Peter Pritchard to the role of Chief
Executive Officer of the Retail Division following his successful
tenure as Chief Operating Officer in that division; and
• the search for a replacement Chief Financial Officer ("CFO")
together with the appointment of Mark Adams as interim CFO
following the mutual agreement that the original candidate would
not be joining the Company.
Each of these changes has required support and recommendations
from the Committee in setting an appropriate level of remuneration
in line with the Group’s remuneration principles. As part of this, we
undertook a detailed review of our remuneration framework to ensure
that it remained aligned with best practice, whilst at the same time
preserving the core values of our business. We summarise below
the key decisions that were made on bonus structure, salary
reviews and the performance conditions for the Performance
Share Plan ("PSP") and Company Share Plan ("CSOP") to be
granted to the Executive Directors for the first time in FY17.
Pets at Home Group PlcAnnual Report and Accounts 2016 We value the views of our Shareholders
and we actively welcome any feedback on our
Remuneration Policy and its implementation.”
Performance related pay
The Committee reviewed the performance of both the business and
each Executive Director against targets set at the beginning of the
year for the annual bonus scheme. For FY16 the annual bonus was
based on EBITDA (75%) and free cash flow (25%) measured over the
53 week period. Detailed information on the targets can be found
on pages 90 and 91 of the Annual Report on Remuneration.
Both EBITDA at £127.4m and free cash flow of £71.6m with a 56%
cash flow conversion were above the minimum thresholds levels at which
payments against these financial targets were triggered for Directors.
As a result, the EBITDA portion of the annual bonus paid out at
47% of maximum (equal to 35% of salary) and the free cash flow
element paid out at 100% of maximum (equal to 25% of salary).
The overall bonus out-turns for our Executive Directors were 60%
of maximum/salary. The Committee considers that this fairly
reflects the results for the year.
Further information can be found on pages 90 and 91 of our
Annual Report on Remuneration.
Remuneration proposals for FY17
Nick Wood resigned as Group CEO with effect from 4 April 2016,
although he will remain with the Group in an advisory role until
1 July 2016 to provide support and ensure a smooth transition. His
leaving arrangements will be in line with our Policy and further details
are provided on page 92 of our Annual Report on Remuneration.
The Committee also gave consideration to the remuneration
arrangements for Ian Kellett following his appointment to the
role of Group CEO. There are no changes proposed to his variable
pay framework, whilst the Committee has taken the opportunity
to reflect the promotion and significantly increased scope of
his responsibilities at this time by repositioning his salary to
£475,000. Further details are provided on page 95.
There will be no change in pension provision or benefit entitlement
for Executive Directors.
As set out in our Policy in 2014, Executive Directors will participate
in the PSP and the CSOP for the first time at the start of FY17.
The main long term incentive plan for Executive Directors is the PSP,
although in line with the approach for all our employee participants,
we deliver an element of this under the CSOP to take advantage of
HMRC-approved tax savings. These plans have been operated for
below Board employees each year since IPO and the Committee
considers that it is appropriate to retain the current EPS and TSR
performance measures for this year, along with their respective
weightings of 75% and 25%.
The Committee considers that the proposed targets are fully
stretching and will ensure that significant reward is only available
for delivery of strong performance.
Malus and clawback
Last year, in response to its review of the UK Corporate Governance
Code, the Committee introduced clawback provisions into both the
Executive Directors’ annual bonus plan for the FY16 performance
year and PSP awards from FY16 onwards. Clawback provisions will
continue to apply to any bonus awards in FY17 and beyond and
under any of the Company’s executive share schemes going forward
from 2016 onwards. Details of this are provided on page 95.
Along with the malus provisions already contained on the PSP,
these provisions provide the Committee with the ability to reduce
unvested share awards or take back bonus amounts or share
awards which had already been paid or vested under certain
circumstances, including misconduct and misstatement of results.
Given the importance of protecting against payments for failure,
these provisions apply to the Executive Directors, the Executive
Management Team and the Operating Board.
Our colleagues
We have always recognised the importance of widespread share
ownership and it remains an integral part of our culture. This reflects
the principle that our colleagues are central to the achievement
of our strategy and we believe that share ownership enhances
loyalty and engagement. In keeping with this ethos, the Committee
approved the grant of a discretionary share award to every colleague
in the Group in June 2015 (excluding the Executive Directors)
and it is the intention that these grants will be repeated this year.
Following on from the successful launch of the Company’s
Sharesave plan in 2014, for the 2015 plan the Committee also
doubled the monthly sum that colleagues are permitted to save
from £250 to £500 and this will continue at this level in 2016.
Chairman
During the year under review, Dennis Millard stepped down as
Chairman of the Remuneration Committee and I was appointed to
replace him. Dennis was appointed as chair of the Committee during
the IPO process and I would like to thank him for his contribution as
we transitioned into the public company environment.
Shareholder engagement
We value the views of our shareholders and we actively welcome
any feedback on our remuneration policy and its implementation.
We hope you find this report helpful and informative and we hope
to receive your support for our Annual Report on Remuneration at
our AGM on 14 September 2016.
Taking into account internal forecasts for business performance over
the next three years, as well as external expectations of performance,
the Committee proposes the following targets for the FY17 awards:
Yours faithfully
• 10% of the total award will vest for earnings per share ("EPS") growth of
5% per annum, rising to 75% for EPS growth of 12.5% per annum; and
• 6.25% of the total award will vest for median TSR performance
against the FTSE 350 UK General Retail Index, rising to 25% for
upper quartile TSR performance against the Index.
Paul Moody
Chairman of the Remuneration Committee
25 May 2016
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Annual Report on Remuneration
a) Directors’ remuneration – report on implementation for the year ended 31 March 2016
This section of the report sets out how the Directors’ Remuneration Policy (“Policy”), approved by shareholders at the Company’s Annual
General Meeting (“AGM”) on 9 September 2014 and set out in the Appendix, has been applied in the financial year being reported on,
and how it will be applied in the coming year. The information presented from this section up until the relevant note on page 93
represents the audited section of this report.
b) Single total figure of remuneration for Executive Directors for the year ended 31 March 2016
The following table sets out the total remuneration for Executive Directors for the year ended 31 March 2016 based on a 53 week year.
All payments are in line with the Policy set out in the Appendix.
Director
Nick Wood
Ian Kellett
Base salary
(£)
FY15
446,165 425,000
394,424 320,000
FY16
Benefits
(£)
FY15
11,500
11,500
FY16
11,721
11,721
FY16
43,905
35,498
Pension
(£)
FY15
Annual bonus
(£)
FY15
FY16
FY16
38,250 262,650 315,711 218,152
n/a
28,800 240,000 250,512
Long term
incentives
(£)
FY15
Total
(£)
FY16
FY15
n/a 982,5931 790,461
n/a 681,643 610,812
1 The change in Nick Wood’s total remuneration between FY15 and FY16 is due to the inclusion of the 19.2% of the total Matching Award that Nick Wood will receive under the
Co-Investment Plan equal to £218,152 as detailed below.
Base salary – corresponds to the amount received during the relevant financial year.
Benefits – corresponds to the taxable value of benefits received during the relevant financial year and principally includes company car
(or cash equivalent), life assurance and permanent health insurance.
Pension – corresponds to either the amount contributed to personal pension plans or the cash value of the salary supplement received
during the relevant financial year. Executive Directors receive a Company pension contribution worth 9% of their salary or a cash
allowance where the Annual Allowance has been reached.
Annual bonus – corresponds to the amount earned in respect of the relevant financial year. Details of how this was calculated are set out below.
Long term incentives – corresponds to the amount earned by Nick Wood in respect of the relevant financial year. Details of how this was
calculated are set out below.
Performance outcomes
The maximum annual bonus opportunity for Executive Directors in respect of FY16 was 100% of base salary.
The targets for the annual bonus for the financial year ended 31 March 2016, and the extent to which they were achieved, are as set out
below. For FY16, the annual bonus was based on EBITDA (75%) and free cash flow (25%) and measured over a 53 week period.
The achievement of the EBITDA target is calculated on a straight-line basis between Minimum and Maximum EBITDA.
The Committee considered that the targets were stretching and required Executive Directors to deliver performance which significantly
exceeded business expectations to achieve full pay-out.
Financial measures
EBITDA
Free cash flow1
Minimum/% base salary
127m/35%
£54.7m with a minimum 40%
cash conversion metric/15%
Maximum/% base salary
£134.5m/75%
£54.7m with a 50% cash
conversion/25%
Actual/% base salary
£127.4m/35%
£71.6m with 56% cash
conversion/25%
1 Free cash flow is defined as net cash from operating activities, less net cash used in investing activities, interest paid and finance lease commitments. Free cash flow is
stated before loans issued, exceptional costs and acquisitions of subsidiaries.
90
Pets at Home Group PlcAnnual Report and Accounts 2016 The resultant percentages against each of the bonus measures achieved by each Executive Director are shown below:
Measure
EBITDA
Free cash flow
Total
Nick Wood
% of performance target achieved
35%/75%
25%/25%
60%/100%
Ian Kellett
% of performance target achieved
35%/75%
25%/25%
60%/100%
Long term incentives
Nick Wood tendered his resignation on 4 April 2016 and accordingly, in line with the early leaver provisions of the plan rules, up to 20%
of his total Matching Award under the Co-Investment Plan will be eligible to vest on his leaving date of 1 July 2016, subject to EPS
performance measured up to the end of FY16. Specifically, if EPS growth over the period from the FY14 base year to the end of FY16
(measured over the 52 week period) is:
• Below 10% per annum, none of the total Matching Award will vest;
• 10% p.a., 10% of the total Matching Award will vest;
• Between 10% p.a. and 17.5% p.a., between 10% and 20% of the total Matching Award will vest (on a straight-line basis); and
• Above 17.5% p.a., 20% of the total Matching Award will vest.
Diluted EPS on underlying trading for FY16 is 15.0p based on a profit after tax before exceptional items of £75,518,000 for the 52 week
period. As a result, EPS growth over this period is 16.9% p.a. and as a result 19.2% of Nick Wood’s Matching Award will vest on 1 July 2016.
This equates to 83,264 shares with a value of £218,152, based on the average share price over the last three months of the
performance period being the period from 1 January to 31 March 2016 which was 262p.
c) Single total figure of remuneration for Non-Executive Directors for the year ended 31 March 2016
The following table sets out the total remuneration for Non-Executive Directors and the Chairman of the Board for the year ended
31 March 2016.
Director
Tony DeNunzio
Dennis Millard
Brian Carroll
Paul Coby
Tessa Green
Amy Stirling
Paul Moody
Basic fees
(£)
200,000
50,000
50,000
50,000
50,000
50,000
50,000
Additional
fees
(£)
n/a
20,0002
Remuneration
Committee
Chairman
(£)
n/a
3,8463
n/a
n/a
n/a
n/a
6,1544
n/a
n/a
n/a
n/a
n/a
Audit & Risk
Committee
Chair
(£)
n/a
n/a
n/a
n/a
n/a
10,000
n/a
Nomination
& Corporate
Governance
Committee
Chairman
(£)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Pets Before
Profit/CSR
Committee
Chair
(£)
n/a
n/a
n/a
n/a
10,000
n/a
n/a
Total single
figure 2016
(£)1
203,846
75,192
50,962
50,962
61,154
61,154
57,308
Total single
figure 2015
(£)
200,000
80,000
50,000
50,000
60,000
60,000
50,000
1 FY16 was a 53 week year and so the total single figure for FY16 contains the additional payment over and above the basic fees for the 53rd week.
2 The additional fee paid to Dennis Millard is in respect to his position as Deputy Chairman of the Board.
3 The fee paid to Dennis Millard as Chairman of the Remuneration Committee relates to the period from the commencement of the year 27 March 2015
until his resignation on 9 September 2015.
4 The fee paid to Paul Moody as Chairman of the Remuneration Committee relates to the period from his appointment on 9 September 2015 until the year
ended 31 March 2016.
d) Scheme interests awarded during the financial year
No long term incentive awards were made to the Executive Directors during the financial year.
During the year, the Company repeated the Sharesave plan, providing eligible colleagues with an opportunity to receive share options at
a 20% discount to the market price. The maximum monthly savings was doubled from £250 to £500 per month. The Executive Directors
elected to participate in the Sharesave, along with 13% of eligible colleagues.
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Annual Report on Remuneration continued
The Options are, in normal circumstances, not exercisable until completion of a three years savings period, beginning on 1 December
2015 and will then be exercisable for a period of six months. The exercise period will, therefore, in normal circumstances, be from
1 December 2018 to 31 May 2019.
The Options were granted in the following amounts:
Executive Director
Ian Kellett
Nick Wood
e) Payments for loss of office
No payments for loss of office were made during the financial year.
Number of shares over which
Sharesave Option was granted
3,913
3,913
Face value of shares over which
Sharesave Option was granted (£)
9,000
9,000
Leaving arrangements for Nick Wood
Nick Wood resigned from the Board with effect from 4 April 2016. To ensure a smooth transition and provide support to the new CEO,
the intention is that he will remain with the Group in an advisory role until 1 July 2016.
All payments made to him in respect of FY16 are reported in the single figure of remuneration.
Nick Wood’s service contract has a 12-month notice period and includes a provision for a termination payment in lieu of notice of up to
12 months’ base salary and contractual benefits only. During the period of his notice that he is working full-time, Nick will continue to
receive his current salary and contractual benefits. Upon leaving the Company’s service on 1 July 2016, he will not be entitled to any
further salary and contractual benefits for any period of notice which is remaining.
He will not be entitled to an annual bonus in respect of FY17.
Nick’s Matching Award under the Co-Investment Plan will be treated in line with the early leaver provisions of the plan rules. Under these,
time pro-rating is applied such that a maximum of 20% of Nick’s Matching Award is eligible to vest, subject to the satisfaction of the EPS
performance targets at the end of FY16. As set out on page 91, performance against these targets as at the end of FY16 was such that
19.2% of the total award will vest on Nick’s leaving the Company’s service being 1 July 2016.
f) Payments to past directors
No payments were made to past directors during the year.
g) Statement of Directors’ shareholding and share interests
The Committee believes that colleague share ownership is an important means to support long term commitment to the Company and
the alignment of colleague interests with those of shareholders.
The interests of the Executive Directors are closely aligned with those of other shareholders in this regard, through the operation of the
Co-Investment Plan, which required participants to commit a significant amount of their IPO proceeds. This was a one off award.
Executive Directors are subject to a shareholding requirement of 200% of base salary, which should be built up over a period of five
years. A similar policy applies to the Executive Management Team. The Committee reviews share ownership levels annually.
92
Pets at Home Group PlcAnnual Report and Accounts 2016 Current shareholding levels for Directors are set out in the table below.
Shareholding
requirement
as a % of salary
(Target – % achieved1)
200% (3384%)
200% (2723%)
–
–
–
–
–
–
–
Number of shares
Interests in share
incentive schemes,
awarded without
performance
conditions at
31 March 2016
10,341
10,341
–
–
–
–
–
–
–
Interests in share
incentive schemes,
awarded subject to
performance
conditions at
31 March 2016
433,6732
326,530
–
–
–
–
–
–
–
Shares owned
outright at
31 March 2016
5,505,571
4,047,056
3,158,026
16,327
40,816
4,082
40,816
16,327
27,470
Shares owned
outright at
26 March 2015
5,505,571
4,047,056
3,158,026
16,327
40,816
4,082
40,816
16,327
27,470
Director
Nick Wood
Ian Kellett
Tony DeNunzio
Dennis Millard
Brian Carroll
Paul Coby
Tessa Green
Amy Stirling
Paul Moody
1 For the purposes of determining the target shareholding achieved, we have used the individual’s salary, the closing share price as at 31 March 2016 (269.1 pence) and the
shares owned outright at the same date.
2 Nick Wood tendered his resignation on 4 April 2016 and accordingly, his Matching Award under the Co-Investment Plan will be treated in line with the early leaver provisions
of the plan rules. Under these, time pro-rating is applied such that a maximum of 20% of Nick’s Matching Award is eligible to vest, subject to the satisfaction of the EPS
performance targets. As set out on page 91, performance against these targets as at the end of FY16 was such that 19.2% of the total award will vest on Nick’s leaving the
service of the Company being 1 July 2016.
This represents the end of the audited section of the report.
h) TSR performance chart
The Company’s shares were admitted to the premium listing segment of the Official List maintained by the UK Financial Conduct
Authority and to trading on the London Stock Exchange plc’s main market for listed securities on 17 March 2014. The chart below shows
performance from that date until the end of FY16. This disclosure will be expanded in subsequent years in line with the regulations.
120
110
100
90
Mar 2014
Pets at Home
FTSE 3501
Mar 2015
Mar 2016
1 The comparator group has been changed from the FTSE 250 index to the FTSE 350 since it is considered to present a more rounded picture of the performance of the UK
listed market as a whole.
CEO
CEO single figure of remuneration
Annual bonus payout
(as % of maximum opportunity)
Long term incentive vesting
(as % of maximum opportunity)
2009/10
n/a
2010/11
n/a
2011/12
n/a
2012/13
n/a
2013/141
19,460
2014/15
790,461
2015/16
982,5932
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
73%
n/a
75%
n/a
60%
96%2
1 In FY14, the single figure of remuneration relates to the period 17 March 2014 to 27 March 2014.
2 Under the early leaver provisions of the plan rules, Nick Wood received 19.2% of his total Matching Award under the Co-Investment Plan, as shown in the single figure table.
Given that this included time pro rating, with performance against the performance conditions being at 96% of maximum, the latter is shown here and the value of £218,152
for the Matching Awards (as calculated under paragraph b above) is included in the single figure of remuneration.
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Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Remuneration Report continued
Annual Report on Remuneration continued
i) Percentage change in remuneration of the Group CEO
The table below sets out the increase in total remuneration of the CEO and that of all colleagues:
Chief Executive
All colleagues1
% change in base salary
FY15 to FY16
3
3
% change in base salary
FY15 to FY16
(17)%
(8)%
% change in benefits
FY15 to FY16
0
0
1 All colleague information is presented by comparing the average colleague information in FY15 to the average colleague information in FY16.
j) Relative importance of the spend on pay
The following table shows the relationship between the Group’s EBITDA, distributions to shareholders and the total remuneration paid to
all colleagues.
EBITDA1
Returned to shareholders:
Dividend
Payments to colleagues:
Wages & salaries
FY16 (£)
127.4m
27.9m
FY15 (£)
119.6m
8.9m
143.6m
122.5m
1 The Committee considers that EBITDA is an important KPI for the Company and provides shareholders with additional context as to how the business has performed
financially in the last two years. The figures for FY16 are based on a 53 week period to 31 March 2016 and the figures for FY15 are based on a 52 week period to
26 March 2015.
k) Dilution limits
In accordance with the ABI Guidelines, the Company can satisfy awards under its colleague share plans with new issue shares up to
maximum of 10% of its issued share capital in a rolling ten year period and within this 10% limit, the Company can only issue 5% of its
issued share capital to satisfy awards under discretionary plans.
l) External appointments
Executive Directors are entitled to accept one external appointment outside the Company with the consent of the Board. Any fees
received may be retained by the Director.
As at the date of this report, neither of the Executive Directors held an external appointment for which they receive a fee.
m) Non-Executive Directors – letters of appointment
A summary of the Non-Executive Directors' letters of appointment is contained on page 105 of the Policy contained in the Appendix.
Each of the Non-Executive's letters of appointment expires on 17 February 2017 apart from Paul Moody whose letter of appointment
expires on 24 March 2017.
94
Pets at Home Group PlcAnnual Report and Accounts 2016 Statement of implementation for FY17
This section provides an overview of how the Committee is proposing to implement our Policy in FY17.
Base salary
As previously disclosed, to reflect his promotion to the role of Group CEO, Ian Kellett will receive a salary of £475,000, effective
4 April 2016. The Committee considers that this is appropriate given the significantly increased scope of his responsibilities at this
time, and taking into account a number of internal and external factors, including consistency with pay principles applied to the rest
of the organisation.
Nick Wood resigned from his position on the Board as Group CEO with effect from 4 April 2016. His salary for the period of FY17 up to
this date was £437,750 (paid on a pro rata basis for the period from 1 April 2016 to 4 April 2016).
Benefits
The Committee sets benefits in line with the policy set out on page 98 of the Appendix. There are no changes proposed to the benefit
framework in FY17.
Pensions
There is no increase proposed to salary supplement levels for the Executive Directors in FY17. The table below shows salary
supplements for FY17.
Executive Director
Ian Kellett
% of salary
9%
Annual bonus
The maximum annual bonus opportunity for Executive Directors in respect of FY17 will remain at 100% of base salary.
The annual bonus framework will be in line with that presented in the policy table on page 98. As highlighted in the Chairman’s letter,
during the year the Committee reviewed the annual bonus framework for FY16, with a view to ensuring that it remains appropriate for
the business.
The Committee considers that it is appropriate at this time to retain the framework that was put in place for FY16, so for FY17 the annual
bonus will continue to be based on EBITDA (75%) and free cash flow (25%).
Although the targets remain commercially sensitive at this time, we will provide shareholders with full disclosure of the EBITDA and free
cash flow targets in next year’s report.
As for FY16, the annual bonus will be subject to clawback provisions. This provides the Committee with the ability to take back amounts
previously paid out for a period of up to two years under certain circumstances, including misstatement and misconduct.
Long term incentive awards
It is proposed that PSP awards will be made in June 2016 at 125% of salary for Executive Directors (with the first portion of the award
granted under the CSOP, as set out in our Policy):
For 2016 awards, performance will be based on EPS (75% of the award) and TSR (25% of the award):
• 10% of the total award will vest for EPS growth of 5% per annum, rising to 75% for EPS growth of 12.5% per annum; and
• 6.25% of the total award will vest for median TSR performance against the FTSE 350 UK General Retail Index, rising to 25% for upper
quartile TSR performance against the Index.
The Committee considers that the performance measures are fully aligned with our strategy. The Committee has set the targets to be
appropriately stretching, with regard to a number of internal and external reference points, and considers that delivery of these targets
should create sustainable value creation for shareholders.
Unvested and unexercised awards are subject to malus and clawback in case of misconduct or misstatement.
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Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Remuneration Report continued
Annual Report on Remuneration continued
Sharesave
The Company intends to operate the Sharesave scheme again for FY17. The maximum monthly savings will be retained at £500 per
month. Executive Directors are eligible to participate.
Non-Executive Director remuneration
The table below shows the Non-Executive Director fee structure for 2016/17:
Chairman of the Board (all-inclusive fee)
Basic Non-Executive Director fee
Board Committee Chairman fee
Deputy Chairman
There are no fees paid for membership of Board Committees.
2016/17
£200,000
£50,000
£10,000
£20,000
The Remuneration Committee
Shareholder context for the Committee’s activities
During the year, the Committee received independent advice on executive remuneration matters from Deloitte LLP ("Deloitte").
Deloitte is a member of the Remuneration Consultants Group and as such, voluntarily operates under the code of conduct in relation
to executive remuneration consulting in the UK. The Committee has reviewed the advice provided by Deloitte during the year and is
comfortable that it has been objective and independent. Total fees received by Deloitte in relation to the remuneration advice provided
to the Committee during FY16 amounted to £29,350, excluding VAT, based on the required time commitment.
In addition, other practices at Deloitte, separate from the executive remuneration practice, have provided general tax advice to the Group
during the year.
During FY16 the Committee also received support from Travers Smith LLP on the terms of the discretionary and all colleague share plans.
Committee membership and meetings
The Directors listed below in the table served on the Committee during the year. The Committee met five times during FY16 and the
Committee members' attendance is also shown in the table below.
Member
Paul Moody (Chairman)
Dennis Millard
Tessa Green
Amy Stirling
Period from:
27 March 2015
27 March 2015
27 March 2015
27 March 2015
To:
To date
To date
To date
To date
Meetings attended
5
5
5
5
The individuals listed in the table below, none of whom were Committee members, attended at least part of the meeting by invitation
during the year.
Attendee
Tony DeNunzio
Brian Carroll
Paul Coby
Nick Wood
Ian Kellett
Nicolas Gheysens
Louise Stonier
Position
Chairman of the Board
Non-Executive Director
Non-Executive Director
Group CEO
CFO and CEO of Retail
Board Observer
Group Company Secretary and Legal Director
None of the individuals attended part of any meeting in which their own compensation was discussed.
96
Pets at Home Group PlcAnnual Report and Accounts 2016 Directors’ Remuneration Policy
Governance
The Board and the Committee consider that, throughout FY16 and up to the date of this report, the Company has complied with the
provisions of the UK Corporate Governance Code relating to Directors’ remuneration.
Shareholder voting
At the Annual General Meeting on 9 September 2015, the total number of shares in issue with voting rights was 500,000,000.
The resolution to approve the Remuneration Policy and the Remuneration Report received the following votes from shareholders:
Ordinary resolutions
To approve the Directors’ Remuneration Report
for the year ended 26 March 2015
Votes
for¹
%²
Votes
against
Votes
total
%
% of
ISC³
Votes
withheld4
396,348,408
99.88
460,066
0.12 396,808,474
79.36
176,710
Notes
1 Votes “for” include discretionary votes.
2 Percentages above are rounded to two decimal places.
3 Issued share capital at meeting date: 500,000,000.
4 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes “for” and “against” a resolution.
Annual General Meeting
As set out in my statement on page 88, our Annual Report on Remuneration will be subject to an advisory vote at our AGM to be held
on 14 September 2016.
On behalf of the Board
Paul Moody
Chairman of the Remuneration Committee
25 May 2016
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Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Remuneration Report continued
Directors’ Remuneration Policy continued
a) Policy Report
The following section on pages 98 to 107 sets out our Directors’ Remuneration Policy, in accordance with section 439A of the
Companies Act 2006. This Policy was approved by shareholders at our AGM on 9 September 2014 and applies from that date.
It is currently intended that the Policy will apply for three years.
Overall remuneration is structured and set at levels to enable the recruitment and retention of high calibre executives and encourage
them to enhance the Company’s performance, in a responsible manner, in line with the business’s strategy and shareholders’ interests.
A significant portion of the package is performance related. Remuneration has been set taking into account practice within the FTSE 250
and practice at other retail companies.
Purpose and link
to strategy
Fixed elements – base salary
Core element
of remuneration,
recognising the role
and responsibilities
of the role.
Operation and performance measurement
• Paid in cash and are pensionable.
• The Committee takes into consideration a number of factors when setting
salaries, including (but not limited to):
– Size and scope of the individual’s responsibilities;
– The individual’s skills, experience and performance;
– Typical salary levels for comparable roles within appropriate
pay comparators including practice for retail companies and
the broader FTSE 250; and
– Pay and conditions elsewhere in the Group.
• In FY15, basic salaries will be reviewed at the June Remuneration
Committee meeting. Subsequent reviews will take place annually
at the March Remuneration Committee annually thereafter.
Any change will usually be effective from the first period of the following
financial year.
Fixed elements – benefits
To provide colleagues
with market competitive
benefits.
• The Company provides a range of benefits, which may include:
– a company car (or cash equivalent)
– life assurance
– permanent health insurance
– private medical insurance.
• These benefits are not pensionable.
• Other benefits may be considered by the Committee, if considered
appropriate.
• The Company may also meet certain mobility costs, such as relocation
support, expatriate allowances, temporary living and transportation
expenses, in line with the prevailing mobility policy and practice for other
senior executives.
• Executive Directors are eligible to participate in any tax-approved all
colleague share plans operated by the Company on the same basis as
other eligible colleagues. Whilst it does not currently operate such a plan,
the Company intends to introduce a Sharesave scheme during the term
of this Policy.
Fixed elements – pensions
To provide colleagues
with an allowance for
retirement planning.
• Pension contributions are made to either the Group Pension Plan,
to personal pension schemes or cash allowances in lieu of
contributions are paid.
98
Maximum opportunity
• Whilst there is no maximum salary level,
any increases will normally be broadly in
line with the wider colleague population
within the relevant geographic area.
• Higher increases may be made under
certain circumstances, at the Committee’s
discretion. For example, this may include:
– Increase in the scope and/or
responsibility of the individual’s role; and
– Development of the individual within
the role.
• Annual base salaries for the Executive
Directors are set out in Part 3(a) of
this report.
• The cost to the Company of providing
other benefits may vary depending on,
for example, market practice and the cost
of insuring certain benefits.
• The Committee keeps the level of benefit
provision under regular review.
• Details of current benefit provision for the
Executive Directors are set out in Part 3(a)
of this report.
• The contribution level for an individual
Executive Director is capped at 9% of base
salary per annum for employer contributions.
• Details of current pension provision for the
Executive Directors are set out in Part 3(a)
of this report.
Pets at Home Group PlcAnnual Report and Accounts 2016 Purpose and link
to strategy
Short term elements – annual bonus
To incentivise
the delivery of our
business plan on
an annual basis.
Operation and performance measurement
• Delivery will normally be in cash and is not pensionable.
• Performance measures are set annually and pay-out levels are determined
by the Committee after the year-end, based on performance against those
targets during the relevant financial year.
Maximum opportunity
• The maximum bonus opportunity is 100%
of base salary.
• 20% is payable for threshold performance
To reward
performance against
key performance
indicators which are
critical to the delivery of
our business strategy.
• Each year, the Committee determines the measures and weightings within
the following parameters:
– At least 75% of the annual bonus will be based on financial performance
measures; and
– No more than 25% of the annual bonus will be based on performance
against non-financial measures, including for example, individual and
strategic objectives.
• The Committee ensures that targets are appropriately stretching
in the context of the business plan and that there is an appropriate balance
between incentivising Executive Directors to meet financial targets for the
year and to deliver specific non-financial goals.
This balance allows the Committee to effectively reward performance
against the key elements of our strategy.
• The Company may amend the performance measures or targets
in exceptional circumstances, where it considers that they are no
longer appropriate.
• There is no provision for recovery.
Long term incentives – overview
At the time of IPO, the Committee wished to put in place long term incentive arrangements which would provide for the continued alignment
of Executive Directors with our shareholders. As such, the Committee approved three long term incentive plans: the Co-Investment Plan
("CIP"), the Performance Share Plan ("PSP") and the Company Share Option Plan ("CSOP").
• CIP – a one-off arrangement, tailored to our post-IPO position. It requires Executive Directors to make a significant personal investment
in order to be eligible to receive a Company match providing that stretching performance conditions are reached. Awards were made
on IPO and there is no intention to make any further awards to current Executive Directors under the Plan.
• PSP – intended to be our regular, ongoing long term incentive plan in future years. Given that Executive Directors were made awards
under the CIP in 2014, there is no intention for current Executive Directors to receive awards under the PSP until 2016.
• CSOP – for Executive Directors, this plan is used to allow the Company and participant to benefit from HMRC-approved option tax
treatment in respect of the initial part of a PSP award (currently up to £30,000). As such, in line with the PSP above, it is not intended
for current Executive Directors to receive awards under the CSOP until 2016.
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Directors’ Remuneration Policy continued
In addition, the Committee intend to introduce a Sharesave plan during the term of this Policy, in which all colleagues will be eligible to
participate (including Executive Directors).
Although we do not intend to make any further awards under the CIP to current Executive Directors following IPO, we have provided details
of the Plan in the Policy Table below for clarity. No individual will be eligible to receive two awards under the CIP. The Committee may
consider granting a new Executive Director a CIP award if it considers it to be appropriate to promote alignment across the executive team.
Operation and performance measurement
Purpose and link
to strategy
Long term elements – Co-Investment Plan ("CIP")1
To promote continued
alignment between
Executive Directors
and shareholders in
the years following IPO.
• Matching Awards vest after three, four and five years, subject to
achievement of performance conditions.
• Additional shares (or cash) may be awarded in lieu of dividends
on any Matching Awards which vest, which would have been paid during
the vesting period.
Maximum opportunity
• Executive Directors invested 250% of base
salary in the CIP at IPO (Invested Shares)
• Subject to performance, Invested Shares
may be eligible for up to a 1:1 Company
match on this amount (Matching Award).
Current Executive
Directors will not
receive any further
awards under the CIP.
• The performance measures under the CIP are:
– 75% EPS growth – to reflect the financial performance of our business
and a direct and focused measure of Company success.
10% of the total Marching Award will vest for EPS growth of 10%
per annum, rising to 75% of the total Matching Award will vest for EPS
growth of 17.5% per annum.
– 25% Relative TSR against the UK General Retail Index – a measure of the
ultimate delivery of shareholder returns, promoting alignment between
Executive Director remuneration and the shareholder experience.
6.25% of the total Marching Award will vest for median TSR performance
against the Index, and 25% of the total Matching Award will vest for upper
quartile TSR performance against the Index.
• The Committee considers that the performance measures are
fully aligned with our corporate strategy. The Committee has set
the targets to be appropriately stretching, with regard to a number
of internal and external reference points, and considers that
delivery of these targets should create sustainable value creation
for shareholders.
• The plan rules also stipulate that the Committee may amend the
performance measures or targets in exceptional circumstances,
where it considers that they are no longer appropriate. If this discretion
was used, we would consult with our major shareholders and the rationale
would be clearly explained in the Remuneration Report.
• Unvested and unexercised awards are subject to malus in case
of misconduct or misstatement.
• Invested shares may also be forfeited in case of fraud, misconduct
or negligence.
• Under the terms of CIP, the treatment of leavers depends on the length
of the period between grant and cessation with Invested Shares being
forfeited in the event of Early Leavers.
See page 104 for further details.
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Pets at Home Group PlcAnnual Report and Accounts 2016 • Awards vest after three years, subject to achievement of performance
Operation and performance measurement
Purpose and link
to strategy
Long term elements – Performance Share Plan ("PSP")1
To incentivise
the delivery of our
business plan on
an annual basis.
conditions.
To reward performance
against key performance
indicators which are
critical to the delivery of
our business strategy.
• Additional shares (or cash) may be awarded in lieu of dividends
on any shares which vest, which would have been paid during the
vesting period.
• Share awards are normally made in the form of conditional share awards,
but may be awarded in other forms if appropriate (such as
nil cost options). The plan rules specify that awards may also be satisfied in
cash although this is unlikely to apply to Directors.
Maximum opportunity
• The maximum award opportunity under
the PSP is normally 150% of base salary
(or 200% of salary in circumstances which
the Committee considers to be exceptional).
The intention is that
current Executive
Directors will not
receive awards under
the PSP until 2016.
• The ultimate goal of the Company’s strategy is to provide long term
sustainable returns to shareholders. The Committee strives to do
this by aligning the performance measures under the PSP with the long term
strategy of the Company and considers that strong performance under the
chosen measures should result in sustainable value creation:
– Financial measure – to reflect the financial performance of our business
and a direct and focused measure of Company success. The Committee
sets targets to be appropriately stretching, with regard to a number of
internal and external reference points.
– Share price performance measure – a measure of the ultimate delivery of
shareholder returns. This promotes alignment between Executive Director
reward and the shareholder experience. Targets are set with reference to
wider market practice and positioned at a level which the Committee
considers represent stretching performance.
• The Committee sets targets each year, achievement of which it considers
would represent stretching performance in the context of the business plan.
• Normally the weighting would be split equally across these two measures,
although the Committee may vary this as appropriate to reflect strategic
priorities.
• For ‘threshold’ levels of performance, 25% of the maximum award vests,
increasing to 100% of the award for maximum performance.
• The plan rules also stipulate that the Committee may amend the performance
measures or targets in exceptional circumstances, where it considers that
they are no longer appropriate. If this discretion was used, we would consult
with our major shareholders and the rationale would be clearly explained in
the Remuneration Report.
• Unvested and unexercised awards are subject to malus in case of
misconduct or misstatement.
• The Committee may at its discretion structure awards as Approved Company
Share Option Plan ("CSOP") awards. CSOP awards enable the participant
and Company to benefit from HMRC approved option tax treatment in
respect of part of the award, without increasing the pre-tax value delivered
to participants. CSOP awards may be structured either as an approved
option for the part of the award up to the HMRC limit (currently £30,000)
with an unapproved option for the balance and a “linked award” to fund the
exercise price of the approved option, or as an approved option and a PSP
award, with the vesting of the PSP award scaled back to take account of any
gain made on exercise of the approved option.
SAYE1
An all-colleague plan,
which encourages
long term shareholding
and to align the
interests of UK
colleagues with
shareholders.
Executive Directors are
eligible to participate.
• SAYE is a HMRC-approved scheme where eligible colleagues are granted
savings-related share options to subscribe for ordinary shares in the
Company. It is intended that the plan will be implemented during 2014.
• Options are granted to be exercisable in conjunction with either a three-year or
five-year savings contract with a monthly savings limit of £500.
• Options are normally granted at a discount of 20% to market price
at the time of invitation.
• There are no performance measures attached to awards under the SAYE.
• The market value of the shares under option
at the date of maturity of the Sharesave
savings contract, less the grant price of
the option at the contract start date.
1 The Committee may in the event of any variation of the Company’s share capital demerger, delisting, or other event which may affect the value of awards, adjust or amend
the terms of awards in accordance with the rules of the relevant share plan. In the case of the SAYE, any changes may be subject to HMRC approval if required.
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Directors’ Remuneration Policy continued
b) Chairman and Non-Executive Director remuneration policy
Purpose and link
to strategy
Overall remuneration
To attract and retain
high calibre individuals
by offering market
competitive fee
arrangements.
Operation and performance measurement
Maximum opportunity
• Non-Executive Directors receive a basic fee in respect of their
Board duties.
• Further fees are paid to Non-Executive Directors in respect of Deputy
Chairman of the Board and/or chairmanship of Board committees.
• The Non-Executive Chairman receives an all-inclusive fee for the role.
• The remuneration of the Non-Executive Chairman is set by the
Remuneration Committee, whilst the Board as a whole is responsible
for determining Non-Executive Director fees. These fees are the sole
element of Non-Executive remuneration and they are not eligible for
incentive awards, pensions or other benefits.
• Fees are typically reviewed annually.
• Expenses incurred in the performance of Non-Executive duties for
the Company may be reimbursed or paid for directly by the Company,
as appropriate, including any tax due on the benefits.
• Current fee levels can be found on page 91.
• Fees are set at a level which is considered
appropriate to attract and retain the calibre
of individual required by the Company.
• The Company’s Articles of Association
provide that the total aggregate
remuneration paid to the Non-Executive
Chairman and the NED’s will be within the
limits set by shareholders.
Legacy matters
The Committee will honour remuneration related commitments to current and former Executive Directors (including the exercise of
any discretions available to the Committee in relation to such commitments) where the terms were agreed prior to the approval and
implementation of the Remuneration Policy detailed in this report (provided that, in the opinion of the Committee, the payment was
not in consideration for the individual becoming an Executive Director of the Company).
For these purposes, payments include the Committee satisfying awards of variable remuneration and, in relation to an award over
shares, the terms of the payment are agreed at the time the award is granted.
Remuneration arrangements throughout the Company
The Remuneration Policy for our Executive Directors is designed in line with the remuneration philosophy and principles that underpin
remuneration for the wider Company.
All our reward arrangements are built around the common objectives and principles outlined below:
• Performance driven – The Company intentionally places significant focus on variable remuneration, ensuring that a meaningful
proportion of remuneration is based on performance. Performance targets are typically aligned with those of the Executive Directors.
As a result, individuals are incentivised towards consistent financial and non-financial business goals and objectives, in addition to
appropriate individual goals.
• Colleagues as shareholders – The Committee intends to put in place a Sharesave plan during the term of this Policy, to allow our wider
colleague population to build up a shareholding in the Company. In addition, under the terms of our IPO, colleagues were permitted to
buy shares in our IPO and over 2,700 colleagues took up this opportunity.
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c) Recruitment policy
The following table sets out the various components which would be considered for inclusion in the remuneration package for the
appointment of an Executive Director and the approach to be adopted by the Committee in respect of each component.
Element
Overall
Fixed elements
(Base salary, benefits
and other benefits)
Policy and operation
• The Committee’s approach when considering the overall remuneration arrangements in the recruitment of a member
of the Board from an external party is to take account of the Executive Director’s remuneration package in their prior role,
the market positioning of the remuneration package, and to not pay more than necessary to facilitate the recruitment of
the individual.
• Where an Executive Director is appointed from within the business, in addition to considering the matters detailed above
for external candidates, the normal policy of the Company is that any legacy arrangements would be honoured in line with
the original terms and conditions.
• We recognise that salary levels drive other elements of the package and would therefore seek to pay a salary which is
competitive, but no more than necessary to secure the individual.
• The Executive Director would be eligible to participate in our benefit and pension plans, including coverage under all
Executive Director and colleague pension and benefit programmes in accordance with the terms and conditions of such
plans, as may be amended by the Company from time to time.
• The Company may meet certain mobility costs, including relocation support, expatriate allowances, temporary living and
transportation expenses in line with the prevailing mobility policy and practice for senior executives.
Short term incentives • The individual will be eligible to participate in the annual bonus plan, in accordance with the rules and terms of the plan in
operation at the time.
Long term incentives
Buy-out awards
• The maximum level of opportunity will be no greater than that set out in the Policy Table above (i.e. 100% of base salary).
• The individual will be eligible to participate in the Performance Share Plan (and the associated Company Share Option
Plan), in accordance with the rules and terms of the plan in operation at the time. The maximum level of opportunity will
be no greater than that set out in the Policy Table above (i.e. 200% of base salary).
• Alternatively, whilst not currently envisaged at this time, the Committee may consider the individual eligible to participate
in the Co-Investment Plan, which would operate under the same terms as for current participants. The maximum level of
opportunity will be no greater than that set out in the Policy Table above (i.e. a maximum Matching Award of 250% of base
salary), and would be pro-rated to reflect the length of the performance period which the individual was due to serve.
• The Committee will consider what buy-out awards (if any) are reasonably necessary to facilitate the recruitment of a new
Executive Director in all circumstances. This includes an assessment of the awards which would be forfeited on leaving
their current employer.
• The Committee will seek to structure any buy-out awards such that overall they are no more generous in terms of quantum
or vesting period than the awards due to be forfeited.
• In determining the quantum and structure of these commitments, the Committee will seek to provide broadly equivalent
value and replicate, as far as practicable, the timing and performance requirements of the awards forfeited.
• Buy-out awards, if used, will be granted using the Company’s existing long term incentive plans to the extent possible,
although awards may also be granted outside of this plan if necessary and as permitted under the Listing Rules.
• In the case of an internal hire, any outstanding awards made in relation to the previous role will be allowed to pay out
according to their original terms.
• If promotion is part way through the year, an additional top-up award may be made to bring the Executive Director’s
opportunity to a level that is appropriate in the circumstances.
d) Service contracts and loss of office arrangements
The Committee’s policy on service contracts and termination arrangements for Executive Directors is set out below. On principle, it is the
Committee’s policy that there should be no element of reward for failure. The Committee’s approach when considering payments in the
event of a loss of office is to take account of the individual circumstances including the reason for the loss of office, Company and
individual performance, contractual obligations of both parties as well as share plan and pension scheme rules.
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The key employment terms and conditions of the current Executive Directors, as stipulated in their service contracts, are set out below:
Area
Notice period
Policy
• The service contracts for Nick Wood and Ian Kellett provide for a notice period from both the Company and the
individual of 12 months for Nick Wood, and six months for Ian Kellett.
Contractual payments
Short term incentives
• New Executive Directors will be appointed on service contracts that have a notice period of not more than 12 months
for both the Company and the individual.
• The Committee considers this policy provides an appropriate balance between the need to retain the services of
key individuals for the benefit of the business and the need to limit the potential liabilities of the Company in the
event of termination.
• Executive Directors’ service contracts allow for termination with contractual notice from the Company or termination
by way of payment in lieu of notice ("PILON"), at the Company’s discretion. Payment in lieu of notice would be made
where circumstances dictate that the Executive Directors’ services are not required for their full notice period.
• Neither notice nor PILON will be given in the event of gross misconduct.
• Payment in lieu of notice will be limited to base salary and contractual benefits for the relevant notice period.
• There is no contractual entitlement to a payment under the annual bonus in respect of the notice period.
• Service contracts allow for mitigation if the individual finds alternative employment.
• The Committee’s policy is not to award an annual incentive for any portion of the notice period not served.
• Where an Executive Director leaves office after the end of a performance year but before the payment is made,
the executive will remain eligible for an annual bonus for that performance year, subject to the normal assessment
of performance achieved over the period.
• Where an Executive Director leaves office during a performance year, any bonus would be at the Committee’s absolute
discretion and would take into account performance and the time served during the period.
Long term incentives
• No bonus will be paid in the event of gross misconduct.
The treatment of unvested long term incentive awards is governed by the rules of the relevant incentive plan.
CIP
Treatment under the CIP is dependent on the period elapsed since the IPO.
a) Within the first 24 months following admission
– Where an individual with a six month notice period voluntarily resigns less than 18 months following the date of
admission, they will forfeit their Invested Shares and their Matching Awards.
b) Between 24 months and 36 months following admission
– Where an individual with a six month notice period voluntarily resigns between 18 months and 30 months following
the date of admission (and completes at least two years’ service by working his notice period or being put on garden
leave, or would have done so but is given PILON), they will retain their Invested Shares and may retain a portion of
their Matching Award subject to achievement of performance targets measured over the first two years of the
performance period.
c) On or after 36 months following admission
– Where an individual with a six month notice period voluntarily resigns on or after 30 months following the date of
admission (and completes at least three years’ service by working his notice period or being put on garden leave,
or would have done so but is given PILON), they will retain their Invested Shares and, if a good leaver (defined as
under the PSP) also their Matching Award, unless the Committee determines otherwise.
Any participant who is dismissed for reasons of fraud or negligence will forfeit their Invested Shares and Matching Awards
in full.
PSP
• Under the PSP, the default position is for unvested awards to lapse upon a loss of office event.
• Where an individual is determined to be a “good” leaver (which includes for reasons of death, illness, injury,
disability, retirement or any other reason at the discretion of the Committee) the Committee may allow unvested
awards to subsist until the relevant vesting date, subject to satisfaction of the performance conditions and
pro-rated for time served.
• Alternatively, the Committee may, at its discretion, allow awards to vest at an earlier date, having regard to the
achievement of performance conditions to that date and the period of time that has passed since the date of grant.
The Committee may choose to apply no reduction in the amount vesting if it is considered appropriate given the
particular circumstances.
Change in control
• The Committee’s policy is that service contracts should not provide for additional compensation on severance as a
result of a change in control.
• Under the PSP, the Committee will determine whether and to what extent awards shall vest, taking into account all
relevant factors including Company performance, the period of time elapsed since the date of grant and the interests
of our shareholders.
• Under the CIP, participants will be eligible to retain their full Invested Shares and all restrictions on them will be lifted.
The Committee will determine whether and to what extent Matching Awards shall vest, taking into account Company
performance, and the period of time elapsed since the date of grant.
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Pets at Home Group PlcAnnual Report and Accounts 2016 External appointments
Executive Directors are permitted to hold an external appointment with the prior consent of the Board. Any fees may be retained
by the individual.
Chairman and Non-Executive Directors
The Non-Executive Directors, including the Chairman of the Board, have letters of appointment which set out their duties and
responsibilities. They do not have service contracts.
The key terms of the appointments are set out in the table below:
Provision
Period
Loss of office
Fees
Expiry of current term
Policy
• Initially appointed for a period of three years, subject to annual review and notice.
• In line with the UK Code, all Directors will seek annual re-appointment by shareholders at the AGM.
• Three months’ notice by either the Company or the Non-Executive Director.
• Non-Executive Directors and the Chairman of the Board are not entitled to compensation on leaving the Board.
• As set out on page 96.
• See page 94 for details of the expiry of the current term of Non-Executive Directors’ letters of appointment.
Availability of documentation
Service contracts and letters of appointment for all Directors are available for inspection by any person at our registered office in
Handforth, Cheshire. They will also be available for inspection during the 30 minutes prior to the start of our AGM to be held in
Manchester on 9 September 2014.
e) Illustration of the Remuneration Policy
Our remuneration arrangements have been designed to ensure that a significant proportion of pay is dependent on the delivery of
stretching short term and long term performance targets, aligned with the creation of sustainable shareholder value. The Committee
considers the level of remuneration that may be received under different performance outcomes to ensure that this is appropriate in
the context of the performance delivered and the value added for shareholders.
The charts below provide illustrative values of the remuneration package for Executive Directors under three assumed performance scenarios.
Scenario
Fixed pay
All performance
scenarios
Variable pay
Minimum
performance
On-target
performance
Maximum
performance
Assumptions
• Consists of total fixed pay, including base salary, benefits and pension.
– Base salary – salary effective as at 17 March 2014.
– Benefits – amount estimated to be received by each Executive Director in 2014/15.
– Pension – salary supplement effective as at 17 March 2014.
• No payout under the annual bonus.
• No vesting under the Performance Share Plan.
• 50% of the maximum pay-out under the annual bonus (i.e. 50% of salary).
• 16% vesting under the Performance Share Plan (i.e. 24% of salary).
• 100% of the maximum pay-out under the annual bonus (i.e. 100% of salary).
• 100% vesting under the Performance Share Plan (i.e. 150% of salary).
Notes
• The Co-Investment Plan has not been included in the scenarios shown, as this plan is not intended to be an ongoing remuneration element under our Policy.
• Under the PSP, the normal maximum limit of 150% of salary has been shown, rather than the exceptional limit of 200% of salary.
• All-colleague share plans have been excluded.
• Any legacy awards which Executive Directors hold have been excluded.
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These charts are for illustrative purposes only and actual outcomes may differ from those shown.
Chief Executive – Nick Wood
Chief Financial Officer – Ian Kellett
1,600
1,400
1,200
1,000
800
600
400
200
0
789
13%
27%
60%
475
100%
1,539
41%
28%
31%
Minimum
Meeting
Expectation
Maximum
Fixed pay
Annual bonus
PSP
Base salary
Benefits
Pension
Total fixed pay
1,600
1,400
1,200
1,000
800
600
400
200
0
1,160
41%
28%
31%
597
13%
27%
60%
Meeting
Expectation
Maximum
360
100%
Minimum
Chief Executive
£425,000
£11,500
£38,250
£474,750
Chief Financial Officer
£320,000
£11,500
£28,800
£360,300
f) Consideration of conditions elsewhere in the Company
As per the Committee’s terms of reference, we also review the pay and conditions of colleagues at levels below the Executive Directors.
This includes approving the design of, and determining targets for any performance related pay schemes such as the bonus scheme
operated by the Company and approving the total annual payments made under such schemes. The Committee is also consulted
concerning any major changes in colleague benefit structures throughout the Group.
The remuneration package for all colleagues (including the Executive Directors) is reviewed on an annual basis and a consistent
approach is applied at all levels. As part of the annual salary and benefits review, the Company takes into account industry standards,
future legislative framework (including the national minimum wage) and the financial and economic environment of the Group both
internally and externally. The annual salary and benefits review is presented to the Committee with recommendations on remuneration
throughout the colleague base, including a proposed salary increase to be applied to all colleagues’ wages, including the Executive
Directors. As such, the Committee has regard to this Group-wide annual review process when setting its Remuneration Policy for
Executive Directors.
Whilst our colleagues are not directly consulted as part of the process of determining pay, the output from colleague surveys, including
our internal “We’re All Ears” survey, is considered when carrying out the annual salary and benefits review.
A significant number of our colleagues are also shareholders and so are able to express their views in the same way as other shareholders.
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g) Consideration of shareholder views
Although we have only recently become a public listed company, the Committee recognises the importance of building a good
relationship with our new shareholders. This reflects our commitment to follow the highest standards of practice in relation to
remuneration and governance at Pets at Home.
In reviewing the remuneration arrangements which were put in place at the time of our IPO, the Committee evaluated current best
practice in the listed environment. In particular, the Committee was keen to promote alignment, motivate our executive team and retain
key talent to drive our business strategy. Our aim was to adopt a remuneration framework which would drive achievement of our
corporate goals, whilst providing shareholders with comfort that it was appropriate, justified and did not encourage unacceptable risk
management behaviour.
We will continue to monitor shareholder views when evaluating and setting ongoing remuneration strategy, and we commit to consulting
with shareholders prior to any significant changes to our Remuneration Policy.
h) Minor amendments
The Committee may make minor amendments to the Policy set out above (for regulatory, exchange control, tax or administrative
purposes or to take account of a change in legislation) without obtaining shareholder approval for that amendment.
107
Pets at Home Group PlcAnnual Report and Accounts 2016 Governance report Financial statements
Independent Auditor’s Report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity as at 31 March 2016
Consolidated statement of changes in equity as at 26 March 2015
Consolidated statement of cash flows
Company balance sheet
Company statement of changes in equity as at 31 March 2016
Company statement of changes in equity as at 26 March 2015
Company income statement
Company statement of cash flows
Notes (forming part of the financial statements)
Advisors and contacts
109
113
113
114
115
116
117
118
119
119
119
120
121
172
108
Pets at Home Group PlcAnnual Report and Accounts 2016
Independent Auditor’s Report
to the Members of Pets at Home Group Plc only
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
We have audited the financial statements of Pets at Home Group Plc for the year ended 31 March 2016 set out on pages 113 to 171.
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 March 2016
and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted
by the European Union (IFRSs as adopted by the EU);
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied
in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the risks of material misstatement that had the greatest effect on our
audit, in decreasing order of audit significance, were as follows:
Carrying value of goodwill (£964.9m) (2015: £952.0m)
Level of risk versus 2015: Consistent
Refer to page 82 (Audit & Risk Committee Report), page 124 (accounting policy) and 134 and 139 (financial disclosures).
• The risk: Goodwill is a significant item within the Group’s balance sheet. Due to the inherent uncertainty involved in forecasting and
discounting future cash flows, which are the basis of the assessment of recoverability, goodwill is one of the key judgemental areas
within our audit.
• Our response: Our audit procedures included testing of the Group’s budgeting procedures upon which the forecasts are based and the
principles and integrity of the Group’s discounted cash flow model. We used our own valuation specialist to assist us in evaluating the
discount rate used by the Group. Assumptions and methodologies used by the Group were compared to externally derived data as well
as our own assessment of key inputs such as projected economic growth, competition, cost inflation and discount rates. We performed
break-even analysis to understand the sensitivity of the conclusions reached to changes in assumptions and compared the sum of
projected discounted cash flows and book value to the Group’s market capitalisation to assess the reasonableness of those cash flows.
We also assessed whether the Group’s disclosures about the sensitivity of the outcome of the impairment assessment to changes in
key assumptions reflected the risks inherent in the valuation of goodwill.
Carrying value of inventory (£52.8m) (2015: £48.5m)
Level of risk versus 2015: Consistent
Refer to page 82 (Audit & Risk Committee Report), page 124 (accounting policy) and page 140 (financial disclosures).
• The risk: The Group has significant levels of inventory and a number of estimates are involved in valuing slow moving and obsolete
inventories, some of which have a limited shelf life. Furthermore there is uncertainty over changes in consumer preferences and
spending patterns, which are primarily driven by wider trends in the pet product industry as well as seasonality. There is a recoverability
risk associated with new product launches and the judgement required in forecasting demand, including the possible change in demand
between the time the inventory order is placed with the supplier and the date of sale. Given the level of judgement and estimation
involved, carrying value of inventory is considered to be a key audit risk.
• Our response: Our procedures included assessing the principles and appropriateness of the Group’s inventory provisioning policies
based on our understanding of the business and the accuracy of previous provisioning estimates. In assessing inventory provisions our
procedures included testing the Group’s controls designed to identify slow moving and obsolete inventories and comparison, by product,
of inventory levels to sales data to assess whether slow moving and obsolete inventories had been appropriately identified, calculated
and provided for by the Group. We considered realisations of slow moving inventories during the year and compared these to the Group’s
expected recoveries for slow moving inventories at the year-end date. We undertook data analytics procedures to compare inventory
carrying value for all individual inventory lines to recent sales prices to assess the appropriateness of provisioning for items held at less
than net realisable value. We also assessed the adequacy of the disclosures in respect of amounts recognised as provision against
inventory during the period.
109
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Independent Auditor’s Report
to the Members of Pets at Home Group Plc only continued
3 Our application of materiality and an overview of the scope of our audit
The materiality for the Group financial statements as a whole was set at £3.5m (2015: £3.0m), determined with reference to a
benchmark of Group profit before taxation, of £92.1m, of which it represents 3.8% (2015: 3.4%).
Profit before tax
£92.1m
Materiality
£3.5m
£3.5m
Whole financial
statements materiality
£2.25m
Materiality
at components
28%
£175k
Misstatements reported
to the Audit & Risk Committee
We report to the Audit & Risk Committee any corrected or uncorrected identified misstatements exceeding £175,000 (2015: £150,000),
in addition to other identified misstatements that warranted reporting on qualitative grounds.
We performed audits for Group reporting purposes at three of the Group’s six reporting components, and a review of financial
information, including enquiry, at a further component containing animal hospitals acquired within the year. The latter was not individually
significant enough to require an audit for Group reporting purposes, however we performed a review of financial information due to the
acquisitions having been made in the year.
The level of coverage from audits for Group reporting purposes and review of the animal hospital component are illustrated below.
Revenue (%)
Total assets (%)
Profit before tax (%)
Audit for Group
reporting purposes
Review of animal
hospital component
Analysis at aggregated
Group level
98
1
1
Audit for Group
reporting purposes
Review of animal
hospital component
Analysis at aggregated
Group level
98
1
1
Audit for Group
reporting purposes
Review of animal
hospital component
Analysis at aggregated
Group level
99
1
0
110
Pets at Home Group PlcAnnual Report and Accounts 2016 For the remaining two components, we performed analysis at an aggregated Group level to re-examine our assessment that there were
no significant risks of material misstatement within these components.
The audits of components for Group reporting purposes were performed by both the Group audit team and component auditors and the
review was performed by component auditors. The Group team instructed the component auditors as to the significant areas to be
covered, which included the relevant risks of material misstatement detailed above, and set out the information required to be reported
back to the Group audit team. The Group audit team approved the component materiality of £2.25m, having regard to the mix of size and
risk profile of the businesses within the Group.
Telephone conferences and meetings were held with component auditors which were not physically visited in order to assess the audit
risk and strategy. At these meetings, the findings reported to the Group team were discussed in more detail, and any further work
required by the Group team was then performed by the component auditor.
4 Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• information given in the Corporate Governance Statement set out on pages 74 to 81 with respect to internal control and risk management
systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.
5 We have nothing to report on the disclosures of principal risks
Based on the knowledge we acquired during our audit, we have nothing material to add or draw attention to in relation to:
• the Directors’ viability statement, on page 71 concerning the principal risks, their management, and, based on that, the Directors’
assessment and expectations of the Group’s continuing in operation over the three years to 2019; or
• the disclosures in note 1 of the financial statements concerning the use of the going concern basis of accounting.
6 We have nothing to report in respect of the matters on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified
other information in the Annual Report that contains a material inconsistency with either that knowledge or the financial statements,
a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
• we have identified material inconsistencies between the knowledge we acquired during our audit and the Directors’ statement that
they consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s performance, business model and strategy; or
• the Audit & Risk Committee Report does not appropriately address matters communicated by us to the Audit & Risk Committee.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a Corporate Governance Statement has not been prepared by the Company.
111
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Independent Auditor’s Report
to the Members of Pets at Home Group Plc only continued
Under the Listing Rules we are required to review:
• the Directors’ statement, set out on page 71, in relation to going concern and longer-term viability; and
• the part of the Corporate Governance Report on pages 66 to 72 relating to the Company’s compliance with the 11 provisions of the
2014 UK Corporate Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out on page 73, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial
statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. This report is made solely to
the Company’s members as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on
our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated into this report as if set out in full and should be read
to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.
Nicola Quayle (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
25 May 2016
112
Pets at Home Group PlcAnnual Report and Accounts 2016 Consolidated income statement
Revenue
Cost of sales
Gross profit
Selling and distribution expenses
Administrative expenses
Operating profit
Financial income
Financial expense
Net financing expense
Profit before tax
Taxation
Profit for the period
53 week period ended 31 March 2016
52 week period ended 26 March 2015
Underlying
Trading
£000
793,126
(360,702)
432,424
(279,293)
(50,868)
102,263
668
(5,628)
(4,960)
97,303
(20,224)
77,079
Exceptional
Items
(note 3,7,8)
£000
–
–
–
–
(835)
(835)
–
(4,326)
(4,326)
(5,161)
Total
£000
793,126
Underlying
Trading
£000
729,086
(360,702)
(333,776)
432,424
395,310
(279,293)
(257,853)
(51,703)
(40,695)
101,428
668
(9,954)
(9,286)
92,142
96,762
572
(10,369)
(9,797)
86,965
Exceptional
Items
(note 8)
£000
–
–
–
–
–
–
–
–
–
–
865
(19,359)
(19,089)
(4,296)
72,783
67,876
4,295
4,295
Total
£000
729,086
(333,776)
395,310
(257,853)
(40,695)
96,762
572
(10,369)
(9,797)
86,965
(14,794)
72,171
Note
2
3
2,3
6
7
8
All activities relate to continuing operations.
Basic and diluted earnings per share attributable to equity shareholders of the Company:
Equity holders of the parent – after exceptional items – basic
Equity holders of the parent – after exceptional items – diluted
Dividends paid and proposed are disclosed in note 9.
The notes on pages 121 to 171 form an integral part of these financial statements.
Consolidated statement of comprehensive income
Profit for the period
Other comprehensive income
Items that are or may be recycled subsequently into profit or loss:
Foreign exchange translation differences
Cash flow hedges – reclassified to profit and loss
Effective portion of changes in fair value of cash flow hedges
Other comprehensive income for the period, before income tax
Income tax on other comprehensive income
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period
The notes on pages 121 to 171 form an integral part of these financial statements.
53 week period
ended
31 March 2016
52 week period
ended
26 March 2015
14.6p
14.5p
14.4p
14.4p
Note
5
5
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
Note
72,783
72,171
21
21
21
14,21
(5)
(1,064)
(536)
(1,605)
320
(1,285)
71,498
(4)
1,113
403
1,512
(303)
1,209
73,380
113
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Consolidated balance sheet
Non-current assets
Property, plant and equipment
Intangible assets
Other non-current assets
Current assets
Inventories
Other financial assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Other interest-bearing loans and borrowings
Trade and other payables
Provisions
Other financial liabilities
Non-current liabilities
Other interest-bearing loans and borrowings
Other payables
Provisions
Other financial liabilities
Deferred tax liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Ordinary share capital
Consolidation reserve
Merger reserve
Translation reserve
Cash flow hedging reserve
Retained earnings
Total equity
On behalf of the Board:
Ian Kellett
Group Chief Executive Officer
Company number: 08885072
The notes on pages 121 to 171 form an integral part of these financial statements.
114
At 31 March
2016
£000
At 26 March
2015
£000
Note
11
12
15
13
15
16
17
18
19
20
15
18
19
20
15
14
114,746
973,549
10,161
102,890
955,512
8,133
1,098,456
1,066,535
52,476
1,947
59,028
39,998
153,449
48,474
1,697
51,627
132,966
234,764
1,251,905
1,301,299
–
(5,000)
(160,140)
(144,754)
(436)
(1,318)
(365)
(632)
(161,894)
(150,751)
(201,091)
(315,674)
(33,165)
(1,387)
(5,999)
(4,885)
(31,483)
(1,706)
–
(4,810)
(246,527)
(353,673)
(408,421)
(504,424)
843,484
796,875
21
5,000
5,000
(372,026)
(372,026)
113,321
113,321
(5)
(429)
–
851
1,097,623
1,049,729
843,484
796,875
Pets at Home Group PlcAnnual Report and Accounts 2016 Consolidated statement of changes in equity
as at 31 March 2016
Share
capital
£000
Consolidation
reserve
£000
Merger
reserve
£000
Translation
reserve
£000
Balance at 26 March 2015
5,000
(372,026)
113,321
Total comprehensive income for the period
Profit for the period
Other comprehensive income (note 21)
Total comprehensive income for the period
Transactions with owners,
recorded directly in equity
Equity dividends paid
Share based payment transactions
Total contributions by and distributions to owners
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5)
(5)
–
–
–
Cash flow
hedging
reserve
£000
Retained
earnings
£000
Total
equity
£000
851 1,049,729
796,875
–
72,783
72,783
(1,280)
–
(1,285)
(1,280)
72,783
71,498
–
–
–
(27,894)
(27,894)
3,005
3,005
(24,889)
(24,889)
Balance at 31 March 2016
5,000
(372,026)
113,321
(5)
(429) 1,097,623
843,484
115
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Consolidated statement of changes in equity
as at 26 March 2015
Share
capital
£000
Share
premium
£000
Consolidation
reserve
£000
Merger
reserve
£000
Translation
reserve
£000
Balance at 27 March 2014
5,000 1,080,477
(372,026)
113,321
Total comprehensive income for the period
Profit for the period
Other comprehensive income (note 21)
Total comprehensive income for the period
Transactions with owners,
recorded directly in equity
–
–
–
–
–
–
Cancellation of share premium1
– (1,080,477)
Equity dividend paid
Share based payment transactions
–
–
–
–
Total contributions by and distributions to owners
– (1,080,477)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 26 March 2015
5,000
–
(372,026)
113,321
4
–
(4)
(4)
–
–
–
–
–
Cash flow
hedging
reserve
£000
Retained
earnings
£000
Total
equity
£000
(362)
(95,665)
730,749
–
72,171
72,171
1,213
1,213
–
1,209
72,171
73,380
– 1,080,477
–
–
–
(8,942)
(8,942)
1,688
1,688
– 1,073,223
(7,254)
851 1,049,729
796,875
1 As contemplated in the Pets at Home Group Plc IPO Prospectus dated 28 February 2014 and pursuant to a shareholder resolution passed on 27 February 2014,
Pets at Home Group Plc completed a reduction of capital, whereby £1,080,477,000 standing to the credit of the Company’s share premium account was cancelled,
creating distributable reserves of an equivalent amount. The cancellation was formally approved by the High Court, and the court order was registered by the Registrar
of Companies and became effective on 30 July 2014. The cancellation has no effect on the overall net asset position of the Company and/or its Group.
116
Pets at Home Group PlcAnnual Report and Accounts 2016 Consolidated statement of cash flows
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation and amortisation
Financial income
Financial expense
Share based payment charges
Taxation
Increase in trade and other receivables
Increase in inventories
Increase in trade and other payables
Decrease in IPO related trade and other payables1
Total increase/(decrease) in trade and other payables
Decrease in provisions
Tax paid – underlying
Tax received – exceptional
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Interest received
Investment in other financial assets
Loans issued
Acquisition of subsidiary, net of cash acquired
Acquisition of property, plant and equipment, and other intangible assets
Net cash used in investing activities
Cash flows from financing activities
Equity dividends paid
Proceeds from new loan
Repayment of borrowings
Loan repayment on acquisition
Finance lease obligations
Issue costs
Interest paid
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
7,021
–
72,783
25,106
(668)
9,954
3,005
19,359
129,539
(6,784)
(3,627)
7,021
(248)
125,901
(14,823)
–
111,078
3,082
413
(1,010)
(1,674)
(8,113)
(36,804)
(44,106)
(27,894)
202,000
(325,000)
(1,808)
(28)
(1,225)
(5,985)
(159,940)
(92,968)
132,966
39,998
16,132
(25,184)
72,171
22,838
(572)
10,369
1,657
14,794
121,257
(9,468)
(2,358)
(9,052)
(225)
100,154
(12,874)
4,295
91,575
874
364
(2,176)
–
–
(30,361)
(31,299)
(8,942)
–
–
–
–
–
(9,191)
(18,133)
42,143
90,823
132,966
1 The Initial Public Offering related payables of £25,184,000 at 27 March 2014 related to costs incurred as part of the IPO on 17 March 2014, which were included in
accruals and other creditors at the period end date, and which were settled in full in the period ended 26 March 2015.
The notes on pages 121 to 171 form an integral part of these financial statements.
117
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements
At 31 March
2016
£000
At 26 March
2015
£000
Note
29
16
17
14
18
19
15
18
15
936,179
936,179
580,493
562,653
1
342
1
90
580,836
562,744
1,517,015
1,498,923
–
(175,738)
(843)
(5,000)
(1,343)
(453)
(176,581)
(6,796)
(201,091)
(315,674)
(866)
–
(378,538)
(322,470)
1,138,477
1,176,453
21
5,000
5,000
113,321
113,321
(1,368)
(362)
1,021,524
1,058,494
1,138,477
1,176,453
Company balance sheet
Non-current assets
Investments in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Deferred tax asset
Total assets
Current liabilities
Other interest-bearing loans and borrowings
Trade and other payables
Other financial liabilities
Non-current liabilities
Other interest-bearing loans and borrowings
Other financial liability
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Ordinary share capital
Merger reserve
Cash flow hedging reserve
Retained earnings
Total equity
On behalf of the Board:
Ian Kellett
Group Chief Executive Officer
Company number: 08885072
118
Pets at Home Group PlcAnnual Report and Accounts 2016 Company statement of changes in equity
as at 31 March 2016
Balance at 26 March 2015
Total comprehensive income for the period
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Equity dividends paid
Share based payment transactions
Total contributions by and distributions to owners
Share
capital
£000
5,000
Merger
reserve
£000
Cash flow
hedging
reserve
£000
Retained
earnings
£000
Total
equity
£000
113,321
(362)
1,058,494
1,176,453
–
–
–
–
–
–
–
–
–
–
–
–
–
(12,081)
(12,081)
(1,006)
(1,006)
–
(1,006)
(12,081)
(13,087)
–
–
–
(27,894)
(27,894)
3,005
3,005
(24,889)
(24,889)
Balance at 31 March 2016
5,000
113,321
(1,368)
1,021,524
1,138,477
Company statement of changes in equity
as at 26 March 2015
Balance at 27 March 2014
Total comprehensive income for the period
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Cancellation of share premium
Equity dividends paid
Share based payment transactions
Total contributions by and distributions to owners
Share
capital
£000
Share
premium
£000
Merger
reserve
£000
5,000
1,080,477
113,321
–
–
–
–
–
–
–
–
–
–
(1,080,477)
–
–
(1,080,477)
–
–
–
–
–
–
–
Cash flow
hedging
reserve
£000
–
–
(362)
(362)
Retained
earnings
£000
Total
equity
£000
(9,001)
1,189,797
(5,728)
–
(5,728)
–
–
–
–
1,080,477
(8,942)
1,688
1,073,223
(5,728)
(362)
(6,090)
–
(8,942)
1,688
7,254
Balance at 26 March 2015
5,000
–
113,321
(362)
1,058,494
1,176,453
Company income statement
As permitted by section 408 of the Companies Act 2006, the Company’s income statement has not been included in these financial statements.
The Company’s loss for the 53 week period ended 31 March 2016 was £12.1m (loss for the 52 week period ended 26 March 2015: £5.7m) including
exceptional finance expenses of £4.3m.
119
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements 53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
(12,081)
3,005
(9,076)
(17,840)
179,035
152,119
(5,697)
1,657
(4,040)
2,698
(12,544)
(13,886)
–
–
–
–
(27,894)
202,000
(325,000)
(1,225)
(152,119)
–
1
1
(8,942)
–
–
–
(8,942)
(22,828)
22,829
1
Company statement of cash flows
Cash flows from operating activities
Loss for the period
Share based payment charges
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Equity dividends paid
Proceeds from new loan
Repayment of borrowings
Issue costs
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
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Pets at Home Group PlcAnnual Report and Accounts 2016 Notes (forming part of the financial statements)
1. Significant accounting policies
Pets at Home Group Plc ("the Company") is a company incorporated in the United Kingdom and its registered office is Epsom Avenue, Stanley Green,
Handforth, Cheshire, SK9 3RN. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented
in these consolidated financial statements.
1.1 Basis of preparation
The consolidated financial statements presented in this document have been prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union. The Company’s financial statements have been prepared in accordance with IFRS as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under
section 408 of the Companies Act 2006 not to publish its individual income statement and related notes.
The financial statements are prepared under the historical cost convention, as modified by the revaluation of derivative financial instruments to fair value,
and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS as adopted by the European Union. New
standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations
Committee (IFRIC) becoming effective during the year have not had a material impact on the Group’s financial statements.
1.2 Measurement convention
The consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair
value: derivative financial instruments, financial instruments classified as fair value through the profit or loss or as available-for-sale. Non-current assets
held for sale are stated at the lower of previous carrying amount and fair value less costs to sell.
1.3 Going concern
The Company’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic
Report. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the Chief Financial Officer’s
Review. In addition, note 22 to the financial statements includes the Company’s objectives, policies and processes for managing its capital; its financial
risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.
The Company has considerable financial resources and financing facilities and prepares detailed business plans that model headroom on financial covenants.
The Directors believe the Group is well placed to manage its business risks successfully and therefore have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in
preparing the consolidated financial statements.
1.4 Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into
consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The
financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that
control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes
the non-controlling interests to have a deficit balance.
Investment in veterinary practices
The Group has a number of non-participatory shareholdings in veterinary practice companies, which are accounted for as joint venture arrangements.
The veterinary practices were established under terms that require mutual agreement between the Group and the joint venture partner, and that do not
give the Group power over decision making to affect its exposure to, or the extent of, the returns from its involvement with the practices and therefore
are not consolidated in these financial statements. Further, the Group is not entitled to profit, losses, or any surplus on winding up or disposal of the
veterinary practices, and as such no participatory interest is recognised.
1.5 Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional
currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement,
except for differences arising on the retranslation of a financial liability designated as a hedge of the net investment in a foreign operation that is
effective, or qualifying cash flow hedges, which are recognised directly in other comprehensive income. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets
and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling
at the dates the fair value was determined.
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1. Significant accounting policies continued
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s
presentational currency, sterling, at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are
translated at an average rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange
differences arising from this translation of foreign operations are reported as an item of other comprehensive income and accumulated in the translation
reserve or non-controlling interest, as the case may be.
Functional currency
The consolidated financial statements are presented in sterling which is the Company’s functional currency and have been rounded to the nearest thousand.
1.6 Classification of financial instruments issued by the Group
Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the following two
conditions:
(a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company (or Group); and
(b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation
to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed
amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the
legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital exclude amounts in relation
to those shares.
1.7 Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents,
loans and borrowings, and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the
effective interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective
interest method.
Investments in debt and equity securities
Other investments in debt and equity securities held by the Group are classified as being available-for-sale and are stated at fair value, with any resultant
gain or loss being recognised directly in equity (in the fair value reserve), except for impairment losses and, in the case of monetary items such as debt
securities, foreign exchange gains and losses. When these investments are derecognised, the cumulative gain or loss previously recognised directly in
equity is recognised in profit or loss. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised
in profit or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the
Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value, net of attributable transaction costs. Subsequent to initial recognition, interest-bearing
borrowings are stated at amortised cost using the effective interest method, less any impairment losses.
Contingent consideration
Contingent consideration on acquisition of a subsidiary is valued at fair value at the time of acquisition. Any subsequent change in fair value is
recognised in profit or loss.
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Pets at Home Group PlcAnnual Report and Accounts 2016 1.8 Derivative financial instruments and hedging
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or loss on re-measurement to fair value is recognised immediately in profit or
loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged
(see below).
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable
forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in the hedging reserve. Any
ineffective portion of the hedge is recognised immediately in the income statement.
If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains and losses
that were recognised directly in equity are reclassified into profit or loss in the same period or periods during which the asset acquired or liability
assumed affects profit or loss, i.e. when interest income or expense is recognised.
For cash flow hedges, other than those covered by the preceding two policy statements, the associated cumulative gain or loss is removed from
equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects profit or loss.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged
forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the
above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss
recognised in equity is recognised in the income statement immediately.
1.9 Intra-group financial instruments
Financial guarantee contracts to guarantee the indebtedness of companies within the Group are considered to be insurance arrangements and
accounted for as such. In this respect, the Group treats the guarantee contract as a contingent liability until such time as it becomes probable that
a payment will be required under the guarantee.
1.10 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property,
plant and equipment.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property,
plant and equipment. Land is not depreciated. The estimated useful lives are as follows:
Freehold property
Motor vehicles
Fixtures, fittings, tools and equipment
Leasehold improvements
50 years
3 years
3–10 years
the term of the lease
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
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Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements
Notes (forming part of the financial statements) continued
1. Significant accounting policies continued
1.11 Business combinations
Business combinations are accounted for by applying the acquisition method as at the acquisition date, which is the date on which control is transferred
to the Group.
Acquisitions on or after 26 March 2010
For acquisitions on or after 26 March 2010, the Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is
not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are
recognised in profit or loss.
A combined put and call option over non-controlling interests is recognised at fair value at the acquisition date and included within the valuation of
goodwill. Subsequent changes to fair value are recognised in profit or loss.
On a transaction-by-transaction basis, the Group elects to measure non-controlling interests, which have both present ownership interests and are
entitled to a proportionate share of net assets of the acquiree in the event of liquidation, either at their fair value or at their proportionate interest in
the recognised amount of the identifiable net assets of the acquiree at the acquisition date. All other non-controlling interests are measured at their
fair value at the acquisition date.
Acquisitions prior to 26 March 2010 (date of adoption of IFRSs)
IFRS 1 grants certain exemptions from the full requirements of Adopted IFRSs for first time adopters. In respect of acquisitions prior to 26 March 2010,
goodwill is included on the basis of its deemed cost.
1.12 Acquisitions and disposals of non-controlling interests
Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their
capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on
a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling
interests are adjusted is recognised directly in equity and attributed to the owners of the parent.
1.13 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle and includes expenditure incurred in
acquiring the inventories, production or conversion costs and other costs in bringing them to their existing location and condition, less rebates and
discounts.
1.14 Impairment excluding inventories, and deferred tax assets
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that
it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that
the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the
present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Interest on the impaired asset continues to
be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.
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Pets at Home Group PlcAnnual Report and Accounts 2016 Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible
assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each period at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other
assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is
allocated to cash-generating units (“CGUs”). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which
goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for
internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies
of the combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are
recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated
to the units, and then to reduce the carrying amounts of the other assets in the unit (or group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at
each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does
not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
1.15 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity and will have no
legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense
in the income statement in the periods during which services are rendered by employees.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is
recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Share based payments
A number of employees of the Company’s subsidiaries (including Directors) receive an element of remuneration in the form of share based payments,
whereby employees render services in exchange for shares or rights over shares.
Share based payments are measured at fair value at the date of grant. The fair value of transactions involving the granting of shares is determined by
the share price at the date of grant. The fair value of transactions involving the granting of share options is calculated by an external valuer based on a
binomial model. In valuing share based payments, no account is taken of any performance conditions, other than conditions linked to the price of the
shares of Pets at Home Group Plc (‘market conditions’).
The cost of share based payments is recognised, together with a corresponding increase in equity, on a straight-line basis over the vesting period based
on the Company’s estimate of how many of the awards will eventually vest. No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
Where the terms of a share based payment award are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition,
an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of the modification.
Where a share based payment award is cancelled, it is treated as if it had vested on the date of cancellation and any expense not yet recognised for the
award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date
that it is granted, the cancelled and new awards are treated as if they were a modification to the original award, as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
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1. Significant accounting policies continued
1.16 Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be
reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
1.17 Revenue and cost of sales
Revenue represents the total amount receivable for goods and services, net of discounts and excluding value added tax, sold in the ordinary course of
business, and arises from activities in the United Kingdom.
Revenue is recognised when significant risks and rewards of ownership have been transferred to the buyer, there is reasonable certainty over recovery
of the consideration and the amount of revenue, associated costs and possible return of goods can be estimated reliably. Revenue is recognised when
transactions are completed in store or online.
Sale of goods in store and online
Retail revenue from the sale of goods is recorded net of value added tax, colleague discounts, coupons and vouchers. Sale of goods represents food and
accessories sold in store and online, with revenue recognised at the point of sale.
VIP loyalty scheme
Under the VIP loyalty scheme, points are earned by customers upon the purchase of goods and services. These points can be converted by nominated
charities into gift cards for redemption against goods and services in store and online. The sales value of the points earned under the VIP scheme are
treated as deferred income; the sales are only recognised once the points have been redeemed by the charities.
Provision of services
Revenue from the provision of services is recorded net of value added tax, colleague discounts, coupons and vouchers. Provision of services represents
veterinary group income, grooming revenue and insurance commissions, with revenue recognised upon provision of the service.
(i) Veterinary group income
Veterinary group income represents revenue from the provision of veterinary services and income from the provision of veterinary administrative support
services. Revenue received for the provision of veterinary services is recognised at the point of provision of the service and is recognised net of value
added tax, colleague discounts, coupons and vouchers. Fee income received from the joint venture veterinary practice companies for administrative
support services is recognised in the period the services relate to and recorded net of value added tax.
(ii) Grooming revenue
Grooming revenue is recognised net of value added tax, colleague discounts, coupons and vouchers, at the point of provision of the service.
Cost of sales
Cost of sales includes costs of goods sold and other directly attributable costs and promotional income received from suppliers, including costs to
deliver administrative support services to joint venture veterinary practices and costs to deliver grooming services.
Exceptional items
Income or costs that are both material and non-recurring, whose significance is sufficient to warrant separate disclosure in the consolidated financial
statements, are referred to as exceptional items. These are included and separately identified within their relevant income statement category.
Supplier income
A number of different types of supplier income are negotiated with suppliers via the joint business planning process, in connection with the purchase
of goods for resale. The supplier income arrangements typically are not co-terminus with the Group’s financial period, instead running alongside the
calendar year. Such income is only recognised when there is reasonable certainty that the conditions for recognition have been met by the Group, and
the income can be measured reliably based on the terms of the contract. This income is recognised as a credit within gross margin and, to the extent
that the rebate relates to unsold stock purchases, as a reduction in the cost of inventory. Supplier income comprises three main elements:
1.
Fixed percentage based income: These relate largely to volumetric rebates based on the joint business plan agreements with suppliers. The income
accrued is based on the Group’s latest forecast volumes and the latest contract agreed with the supplier. Income is not recognised until the
Group has reasonable certainty that the joint business agreement will be fulfilled, with the amount of income accrued regularly re-assessed and
re-measured throughout the contractual period, based on actual performance against the joint business plan.
2.
Fixed lump sum income: These are typically guaranteed lump sum payments made by the supplier and are not based on volume. Fixed lump sum
income is usually predicated on confirmation of a supplier contract and typically includes performance conditions upon the Group, such as marketing
and promotional campaigns. These amounts are recognised periodically based on the most recent assessment of contractual performance.
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Pets at Home Group PlcAnnual Report and Accounts 2016 3.
Growth income: These are tiered volumetric rebates relating to growth targets agreed with the supplier in the joint business planning process.
These are retrospective rebates based on sales volumes or purchased volumes. Income is recognised to the extent that it is reasonably certain
that the conditions will be achieved, with such certainty increasing in the latter part of the calendar year.
Supplier income is recognised on an accruals basis, based on the expected entitlement that has been earned up to the balance sheet date for each
relevant supplier contract. The accrued incentives, rebates and discounts receivable at year end are included within trade and other receivables.
1.18 Expenses
Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives
received are recognised in the income statement over the term of the lease as an integral part of the total lease expense.
Financing income and expenses
Financing expenses comprise interest payable under the effective interest rate method, incorporating amortisation of loan arrangement fees, finance
charges on shares classified as liabilities and finance leases recognised in profit or loss using the effective interest method, unwinding of the discount
on provisions and net foreign exchange losses that are recognised in the income statement (see foreign currency accounting policy). Borrowing costs that
are directly attributable to the acquisition, construction or production of an asset that takes a substantial time to be prepared for use, are capitalised as
part of the cost of that asset. Financing income comprises interest receivable on funds invested, dividend income, and net foreign exchange gains.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend income is recognised in
the income statement on the date the entity’s right to receive payment is established. Foreign currency gains and losses are reported on a net basis.
Other payables
Lease incentives are received in the form of cash contributions and rent free periods.
Cash contributions from landlords for store fit-outs are initially recognised as a liability in the balance sheet at the point the recognition criteria in the
lease is met and credited to selling and distribution expenses in the consolidated income statement on a straight-line basis over the term of the lease
commencing from access date. Cash contributions are not discounted.
Rent free periods received from landlords are initially recognised as a liability on the balance sheet, which is then credited to the selling and distribution
expenses in the consolidated income statement over the life of the lease. The effect is to recognise a reduction in selling and distribution expenses on
a straight-line basis from property access date to the end of the lease. Rent free periods are not discounted.
1.19 Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates
to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in respect of previous periods.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition
of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance
sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference
can be utilised.
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1. Significant accounting policies continued
1.20 Adopted IFRS not yet applied
The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements. The Group is currently assessing
the effect of these standards on the financial statements.
• IFRS 15 Revenue from contracts with customers (European Union effective date 1 January 2018).
• IFRS 16 Leases (European Union effective date 1 January 2019).
The following Adopted IFRSs have also been issued but have not been applied by the Group in these financial statements. Their adoption is not expected
to have a material effect on the financial statements.
• Accounting for Acquisitions of Interests in Joint Operations – Amendments to IFRS 11 (European Union effective date 1 January 2016).
• Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38 (European Union effective date
1 January 2016).
• Agriculture: Bearer Plants – Amendments to IAS 16 and IAS 41 (European Union effective date 1 January 2016).
• Equity Method in Separate Financial Statements – Amendments to IAS 27 (European Union effective date 1 January 2016).
• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28
(European Union effective date 1 January 2016).
• Investment entities: Applying the Consolidation Exception – Amendments to IFRS 10, IFRS 12 and IAS 28 (European Union effective date
1 January 2016).
• Disclosure Initiative – Amendments to IAS 7 (European Union effective date 1 January 2017).
• IFRS 9 Financial Instruments (European Union effective date 1 January 2018).
1.21 Accounting estimates and judgements
The preparation of consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions
concerning the future that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. These
judgements are based on historical experience and management’s best knowledge at the time and the actual results may ultimately differ from these
estimates. Estimates and underlying assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognised in the period
in which the estimates are revised and in any future periods affected.
The estimates and assumptions that have significant risk of causing a material adjustment to the carrying value of assets and liabilities are discussed below.
Carrying value of inventories
The managers review the market value of and demand for inventories on a periodic basis to ensure inventory is recorded in the financial statements at
the lower of cost and net realisable value. Any provision for impairment is recorded against the carrying value of inventories. The managers use their
knowledge of market conditions to assess future demand for the Group’s products and achievable selling prices.
Impairment of goodwill and other intangibles
Determining whether goodwill and other intangibles are impaired requires an estimation of the value in use of the cash-generating units to which
goodwill and other intangible assets have been allocated. The value in use calculation requires estimation of future cash flows expected to arise from
the cash-generating unit and a suitable discount rate in order to calculate present value. Details of CGUs as well as further information about the
assumptions made are disclosed in note 10.
Assumptions relating to tax
The Group recognises expected assets for tax based on an estimation of the likely taxes receivable, which requires significant judgement as to the
ultimate tax determination of certain items. Where the actual asset arising from these issues differs from these estimates, such differences will have
an impact on income tax and deferred tax assets in the period when such determination is made.
Provisions
Provisions have been made for dilapidations and for closed stores. Information about provisions and contingencies, which are considered to have a risk
of material adjustment in the next financial period due to the assumptions and estimations used, are disclosed in note 20. The provisions are based on
historical experience and management’s best knowledge at the time and are reviewed at each balance sheet date. The actual costs and timing of future
cash flows are dependent on future events. Any difference between expectations and the actual future liability will be accounted for in the period when
such determination is made.
1.22 Dividends
Final dividends are recognised in the Group’s financial statements as a liability in the period in which the dividends are approved by shareholders such
that the Company is obliged to pay the dividend. Interim equity dividends are recognised in the period in which they are paid.
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Pets at Home Group PlcAnnual Report and Accounts 2016 2. Segmental reporting
The Directors consider there to be one operating and reportable segment, being that of the sale of pet products and services through retail outlets,
specialist vet referral services and the Group’s websites. The Group’s Board receives monthly financial information at this level and uses this information
to monitor the performance of the store portfolio, allocate resources and make operational decisions. The internal reporting received focuses on the
Group as a whole and does not identify individual segments. To increase transparency, the Group has decided to include an additional voluntary
disclosure analysing revenue within the reportable segment.
Revenue
Food
Accessories
Services and other
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
390,041
320,162
82,923
793,126
359,377
306,754
62,955
729,086
The ‘services and other’ category includes veterinary group income, veterinary referral centres, grooming revenue, insurance commissions and the sale
of pets.
The performance of the operating segment is primarily based on a measure of Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA)
before exceptional items. This can be reconciled to statutory operating profit as follows:
Operating profit
Exceptional items
Underlying operating profit before exceptional items
Depreciation and amortisation
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
101,428
96,762
835
102,263
25,106
–
96,762
22,838
Underlying Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) (before exceptional items)
127,369
119,600
129
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
3. Expenses and auditor’s remuneration
Included in operating profit are the following:
Exceptional operating expenses
Depreciation of tangible fixed assets
Amortisation of intangible assets
Rentals under operating leases:
Hire of plant and machinery
Property
Rental income from sublets
Share based payment charges
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
835
21,915
3,191
3,886
70,405
(10,171)
3,005
–
19,659
3,179
3,648
66,474
(8,054)
1,657
Exceptional items in operating profit in the 53 week period ended 31 March 2016 of £835,000 represents costs incurred in relation to the acquisitions
completed during the period and subsequent to the period end. There are no exceptional items included in operating profit in the 52 week period ended
26 March 2015.
Audit of the parent company financial statements
Amounts receivable by the Company’s auditor and its associates in respect of:
Audit of financial statements of subsidiaries pursuant to legislation
Review of interim financial statements
Taxation compliance services
Other tax advisory services
All other services
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
10
163
35
20
3
–
231
10
146
35
20
56
9
276
130
Pets at Home Group PlcAnnual Report and Accounts 2016 4. Colleague numbers and costs
The average number of persons employed (full time equivalents) by the Group (including Directors) during the period, analysed by category, was as follows:
Sales and distribution
Administration
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Contributions to defined contribution plans
Remuneration of Directors:
Executive Directors’ emoluments including social security costs
Non-Executive Directors’ emoluments including social security costs
Executive Directors' amounts receivable under share options
Pension contributions
53 week period
ended
31 March 2016
Number
52 week period
ended
26 March 2015
Number
5,008
466
5,474
4,863
397
5,260
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
143,553
122,510
11,044
4,294
10,051
3,984
158,891
136,545
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
1,367
550
218
79
1,489
550
–
67
2,214
2,106
Included in pension contributions of £79,000 (2015: £67,000) is £33,000 (2015: £38,000) of contributions that the Group made to a money purchase
scheme in relation to the qualifying services of one Executive Director.
In the opinion of the Board, the key management as defined under revised IAS 24 ‘Related Party Disclosures’ are the Executive Directors and the
Non-Executive Directors.
131
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
5. Earnings per share
Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive
potential ordinary shares into ordinary shares.
Profit attributable to equity shareholders of the parent (£000s)
53 week period ended 31 March 2016
52 week period ended 26 March 2015
Underlying
Trading
77,079
After
Exceptional
Items
72,783
Underlying
Trading
67,876
After
Exceptional
Items
72,171
Basic weighted average number of shares
500,000,000
500,000,000
500,000,000
500,000,000
Dilutive potential ordinary shares
2,048,984
2,048,984
1,109,716
1,109,716
Diluted weighted average number of shares
502,048,984
502,048,984
501,109,716
501,109,716
Basic earnings per share
Diluted earnings per share
6. Finance income
Interest receivable
Other finance income
Total finance income
7. Finance expense
Bank loans at effective interest rate
Other interest expense
Total underlying finance expense
Exceptional amortisation costs
Total exceptional finance expense
Total finance expense
15.4p
15.4p
14.6p
14.5p
13.5p
13.5p
14.4p
14.4p
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
401
267
668
572
–
572
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
5,628
10,367
–
5,628
4,326
4,326
9,954
2
10,369
–
–
10,369
Exceptional finance expenses in the 53 week period ended 31 March 2016 related to £4,326,000 of accelerated amortisation following the repayment
of the senior bank facility of £325,000,000 in the period.
132
Pets at Home Group PlcAnnual Report and Accounts 2016 8. Taxation
Recognised in the income statement
Current tax expense
Current period
Adjustments in respect of prior periods
Current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Reduction in tax rate
Adjustments in respect of prior periods
Deferred tax expense
Total tax expense
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
19,441
(294)
19,147
155
(263)
320
212
19,359
15,307
(5,065)
10,242
4,319
–
233
4,552
14,794
The UK corporation tax standard rate for the period was 20% (2015: 21%). The March 2015 budget announced that the UK corporation tax rate will
further reduce to 19% (effective from 1 April 2017). The March 2016 budget announced a further reduction in the corporation tax rate to 17% from 1 April
2020. The deferred tax liability has been calculated based on the rate of 19% which is the rate at which the majority of items are expected to reverse.
Deferred tax recognised in comprehensive income
Effective portion of changes in fair value of cash flow hedges
Reconciliation of effective tax rate
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
(320)
303
53 week period ended 31 March 2016
Underlying
Trading
£000
Exceptional
Items
£000
Total
£000
52 week period ended 26 March 2015
Underlying
Trading
£000
Exceptional
Items
£000
Total
£000
Profit for the period
Total tax expense
Profit before tax
Tax using the UK corporation tax rate for
the period of 20% (52 week period ended
26 March 2015: 21%)
Impact of reduction in tax rate on deferred
tax balances
Depreciation on expenditure not eligible for tax relief
Expenditure not eligible for tax relief
Adjustments in respect of prior periods
77,079
20,224
97,303
19,460
(263)
862
139
26
(4,296)
(865)
(5,161)
(1,032)
72,783
19,359
92,142
18,428
67,876
19,089
86,965
18,263
–
–
167
–
(263)
(45)
862
306
26
1,424
217
(770)
Total tax expense
20,224
(865)
19,359
19,089
4,295
(4,295)
–
–
–
–
–
(4,295)
(4,295)
72,171
14,794
86,965
18,263
(45)
1,424
217
(5,065)
14,794
The UK corporation tax standard rate for the 53 week period ended 31 March 2016 was 20% (52 week period ended 26 March 2015: 21%). The
effective tax rate before exceptional items for the 53 week period ended 31 March 2016 was 21%. The principal reason for the difference in rate relates
to the non-deductibility of depreciation charged on certain items of capital expenditure.
133
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
9. Dividends paid and proposed
Declared and paid during the period:
Final dividend of 3.6p per share (2014: 0p per share)
Interim dividend of 2.0p per share (2015: 1.8p per share)
Proposed for approval by shareholders at the AGM:
Final dividend of 5.5p per share (2015: 3.6p per share)
Group and Company
53 week period
ended
31 March 2016
£000
52 week period
ended
26 March 2015
£000
17,932
9,962
–
8,942
27,394
17,932
The trustees of the following holdings of Pets at Home Group Plc shares under the Pets at Home Group Employee Benefit Trusts have waived or
otherwise foregone any and all dividends paid in relation to the period ended 31 March 2016 and to be paid at any time in the future (subject to the
exceptions in the relevant trust deed) on its respective shares for the time being comprised in the Trust Funds as follows: Computershare Nominees
(Channel Islands) Limited (holding at 31 March 2016: 1,466,540 shares, holding at 26 March 2015: 1,466,861 shares), has waived its rights to all
dividends; and, Wealth Nominees Limited (holding at 31 March 2016: 434,056 shares, holding at 27 March 2015: 434,056 shares), has waived its
rights to all dividends.
10. Business combinations
Subsidiaries acquired
Anderson Moores Veterinary Specialists Ltd
Veterinary referral centre
18 January 2016
Northwest Surgeons Ltd
Veterinary referral centre
15 April 2015
Principal
activity
Date of acquisition
In addition to the above acquisitions, the Group also acquired a franchised Vets4Pets veterinary practice, Leyland Vets.
Proportion of
voting equity
instruments
acquired
Cash
consideration
transferred
£000
75%
100%
7,525
2,600
Acquisition of Anderson Moores Veterinary Specialists Ltd
On 18 January 2016, the Group acquired 75% of the total share capital of Anderson Moores Veterinary Specialists Ltd in exchange for cash and
contingent consideration. The remaining share capital of Anderson Moores Veterinary Specialists Ltd is held by non-controlling interests.
A put and call option, written into the Articles of Association, allows the non-controlling shareholders to require sale of their shares to the Group at an
agreed pricing method at certain points in the future. The Articles also contain provision for the Group to buy the non-controlling shares under the same
pricing mechanism at certain times.
As a consequence, the put and call option has been treated as a forward contract and as a result, the financial statements are prepared on the basis
that the Group owns 100% of the total share capital of Anderson Moores Veterinary Specialists Ltd. Therefore no non-controlling interest is recognised.
The deemed value of the put and call option is treated as a forward contract.
Consideration transferred
Cash
Contingent consideration
Forward contract
134
Anderson
Moores
Veterinary
Specialists Ltd
£000
7,525
1,000
4,117
12,642
Pets at Home Group PlcAnnual Report and Accounts 2016 Acquisition related costs amounting to £225,000 have been excluded from the consideration transferred and have been recognised as an expense
in the profit and loss account in the current period, within the ‘administrative expenses’ exceptional line item.
The business combination includes an element of consideration payable on satisfaction of certain performance conditions in the period to 31 March
2018. The forecast contingent consideration payable, based on the Directors’ best estimate of performance at the time of acquisition, in the future
period, is £1,000,000.
Assets acquired and liabilities recognised at the date of acquisition
The provisional amounts recognised in respect of identifiable assets and liabilities relating to the acquisition are as follows:
Carrying
amounts
£000
Accounting
policy
adjustments
£000
Fair value
adjustments
£000
Assets and
liabilities
acquired
£000
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets
Tangible fixed assets
Current liabilities
Trade and other payables
Deferred tax liabilities
Provisional goodwill arising on acquisition
Consideration transferred
Contingent consideration
Forward contract
Less: fair value of net assets acquired
Goodwill arising on acquisition
1,733
300
228
810
(1,051)
(114)
1,906
–
–
–
–
–
–
–
–
(10)
–
(3)
–
–
(13)
1,733
290
228
807
(1,051)
(114)
1,893
Anderson
Moores
Veterinary
Specialists Ltd
£000
7,525
1,000
4,117
(1,893)
10,749
Goodwill arose on the acquisition of Anderson Moores Veterinary Specialists Ltd because the cost of the combination included a control premium in
addition to the consideration paid for the combination, effectively including amounts in relation to the benefits of expected synergies, revenue growth and
future market development. Those benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable
intangible assets.
The goodwill is deemed to be provisional due to the timing of the acquisition in relation to the period end. It is considered that further information could
come to light that could affect the fair value of net assets acquired.
None of the goodwill identified on this acquisition is expected to be deductible for tax purposes.
135
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
10. Business combinations continued
Net cash outflow on acquisition of subsidiary
Initial cash consideration
Less: cash and cash equivalents acquired
Total cash paid (before contingent consideration)
Anderson
Moores
Veterinary
Specialists Ltd
£000
7,525
(1,733)
5,792
Impact of acquisition on the results of the Group
Included in the operating profit for the period ended 31 March 2016 is £164,000 attributable to the additional business generated by Anderson Moores
Veterinary Specialists Ltd. Revenue for the period ended 31 March 2016 includes £1,481,000 in respect of Anderson Moores Veterinary Specialists Ltd.
Had the business combination been effected at 27 March 2015, the revenue for the Group from continuing operations would have been £799,293,000
and the operating profit for the period from continuing operations would have been £102,518,000.
Acquisition of Northwest Surgeons Limited
On 15 April 2015, the Group acquired 100% of the share capital of Northwest Surgeons Limited in exchange for cash and contingent consideration.
Consideration transferred
Cash
Contingent consideration
Northwest
Surgeons Limited
£000
2,600
562
3,162
Acquisition related costs amounting to £101,000 have been excluded from the consideration transferred and have been recognised as an expense in the
profit and loss account in the current period, within the ‘administrative expenses’ line item.
The business combination includes an “earn out” mechanism whereby additional consideration may become payable in the financial period to 30 March
2017, subject to the EBITDA performance of Northwest Surgeons Ltd in the period from 1 April 2015 to 31 March 2016.
The forecast contingent consideration payable, based on the Directors’ best estimate of the EBITDA performance at the time of acquisition, in the "earn
out" period, is £562,000. The maximum contingent consideration payable is £680,000 and the minimum contingent consideration payable is £nil.
136
Pets at Home Group PlcAnnual Report and Accounts 2016 Assets acquired and liabilities recognised at the date of acquisition
The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition are as follows:
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets
Tangible fixed assets
Current liabilities
Trade and other payables
Non-current liabilities
Bank loans
Other payables
Deferred tax liabilities
Goodwill arising on acquisition
Consideration transferred
Less: fair value of net assets acquired
Goodwill arising on acquisition
Carrying
amounts
£000
Accounting
policy
adjustments
£000
Fair value
adjustments
£000
Assets and
liabilities
acquired
£000
190
329
146
2,051
(694)
(1,552)
(56)
(69)
345
–
–
–
–
–
–
–
–
–
–
–
–
190
329
146
(178)
1,873
–
–
–
–
(178)
(694)
(1,552)
(56)
(69)
167
Northwest
Surgeons Limited
£000
3,162
(167)
2,995
Goodwill arose on the acquisition of Northwest Surgeons Limited because the cost of the combination included a control premium in addition to
the consideration paid for the combination effectively including amounts in relation to the benefits of expected synergies, revenue growth, and future
market development. Those benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable
intangible assets.
None of the goodwill identified on this acquisition is expected to be deductible for tax purposes.
137
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
10. Business combinations continued
Net cash outflow on acquisition of subsidiary
Initial cash consideration
Less: cash and cash equivalents acquired
Total cash paid (before contingent consideration)
Northwest
Surgeons Limited
£000
2,600
(190)
2,410
Impact of acquisition on the results of the Group
Included in the operating profit for the period ended 31 March 2016 is £317,000 attributable to the additional business generated by Northwest
Surgeons Limited. Revenue for the period ended 31 March 2016 includes £4,889,000 in respect of Northwest Surgeons Limited.
Other acquisitions
In addition to the above acquisitions, the Group also acquired a franchised Vets4Pets veterinary practice, Leyland Vets. The acquisition resulted in
additional goodwill of £149,000.
11. Property, plant and equipment
Freehold
property
£000
2,508
44
1,435
(1,470)
2,517
118
71
(31)
158
Short
leasehold
property
£000
35,225
6,097
577
(725)
Fixtures,
fittings,
tools and
equipment
£000
127,579
28,031
669
(1,044)
Total
£000
165,312
34,172
2,681
(3,239)
41,174
155,235
198,926
9,978
2,684
(54)
52,326
19,160
(72)
62,422
21,915
(157)
12,608
71,414
84,180
2,390
2,359
25,247
28,566
75,253
83,821
102,890
114,746
Cost
Balance at 26 March 2015
Additions
Assets acquired on acquisition
Disposals
Balance at 31 March 2016
Depreciation and impairment
Balance at 26 March 2015
Depreciation charge for the period
Disposals
Balance at 31 March 2016
Net book value
At 26 March 2015
At 31 March 2016
138
Pets at Home Group PlcAnnual Report and Accounts 2016 12. Intangible assets
Cost
Balance at 26 March 2015
Additions
Assets acquired on acquisition
Balance at 31 March 2016
Amortisation
Balance at 26 March 2015
Amortisation charge for the period
Balance at 31 March 2016
Net book value
At 26 March 2015
At 31 March 2016
Goodwill
£000
Software
£000
Total
£000
952,032
–
13,893
965,925
11,798
7,335
–
963,830
7,335
13,893
19,133
985,058
–
–
–
8,318
3,191
8,318
3,191
11,509
11,509
952,032
965,925
3,480
7,624
955,512
973,549
Amortisation and impairment charge
The amortisation charge is recognised in total in operating expenses within the income statement.
Impairment testing
Cash Generating Units (‘CGUs’) within the Group are considered to be the body of stores including vets practices, and the Group’s websites as disclosed
in note 2. The Group is deemed to have one overall group of CGUs as follows:
Pets at Home Group
Goodwill
At 31 March
2016
£000
At 26 March
2015
£000
965,925
952,032
The recoverable amount of the CGU group has been calculated with reference to its value in use. The key assumptions of this calculation are shown below:
Period on which management approved forecasts are based (years)
Growth rate applied beyond approved forecast period
Discount rate (pre-tax)
At 31 March
2016
At 26 March
2015
3
3%
10%
3
3%
9%
The goodwill is considered to have an indefinite useful economic life and the recoverable amount is determined based on “value-in-use” calculations.
These calculations use a pre-tax cash flow projection based on a three year plan approved by the Board.
The key assumptions in this business plan are like-for-like sales growth, and gross and operating profit margins. The forecast assumptions reflect
continual innovation, our deep understanding of our customers and a detailed analysis of geographic opportunities that allow us to continue to grow. The
projections are based on all available information and growth rates do not exceed growth rates achieved in prior periods. A different set of assumptions
may be more appropriate in future years depending on changes in the macro-economic environment.
The discount rate was estimated based on past experience and industry average weighted average cost of capital. The Directors have assumed a growth
rate projection beyond the three year period based on inflationary increases.
The total recoverable amount in respect of goodwill for the CGU group as assessed by the managers using the above assumptions is greater than the
carrying amount and therefore no impairment charge has been booked in each period. The Directors consider that it is not reasonably possible for the
assumptions to change so significantly as to eliminate the excess.
139
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
13. Inventories
Finished goods
At 31 March
2016
£000
At 26 March
2015
£000
52,476
48,474
The cost of inventories recognised as an expense and included in ‘cost of sales’ is £381,863,000 (period ended 26 March 2015: £340,968,000).
At 31 March 2016 the inventory provision amounted to £2.0m (26 March 2015: £2.0m).
In the 53 week period ended 31 March 2016, the value of inventory written off to the income statement amounted to £8.3m (52 week period ended
26 March 2015: £7.6m).
14. Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Inventories
Financial assets
Financial liabilities
Other
Net tax assets/(liabilities)
Movement in deferred tax during the period
At 31 March 2016
Liabilities
£000
Assets
£000
Total
£000
At 26 March 2015
Liabilities
£000
Assets
£000
Total
£000
–
–
365
–
1,349
1,714
(1,202)
(1,202)
–
–
(258)
(5,139)
(6,599)
–
365
(258)
(3,790)
(4,885)
–
–
126
–
874
1,000
(1,545)
(1,545)
–
–
(339)
(3,926)
(5,810)
–
126
(339)
(3,052)
(4,810)
26 March 2015
£000
Liability acquired
on acquisition
£000
Recognised
in income
£000
Recognised
in equity
£000
31 March 2016
£000
Property, plant and equipment
(1,545)
(183)
Inventories
Net financial assets
Other
Movement in deferred tax during the period
–
(213)
(3,052)
(4,810)
–
–
–
(183)
525
–
–
(737)
(212)
–
–
320
–
320
(1,203)
–
107
(3,789)
(4,885)
Property, plant and equipment
Inventories
Net financial assets
Other
Company
Financial assets
27 March 2014
£000
Recognised
in income
£000
Recognised
in equity
£000
26 March 2015
£000
(1,592)
(13)
90
1,560
45
47
13
–
(4,612)
(4,552)
–
–
(303)
–
(303)
(1,545)
–
(213)
(3,052)
(4,810)
26 March 2015
£000
Recognised
in income
£000
Recognised
in equity
£000
31 March 2016
£000
90
–
252
342
The rate used to calculate deferred tax assets and liabilities has been disclosed in note 8.
140
Pets at Home Group PlcAnnual Report and Accounts 2016 15. Other financial assets and liabilities
Non-current assets
Investments in joint ventures
Loans to related parties
Group
At 31 March
2016
£000
At 26 March
2015
£000
9,143
1,018
10,161
8,133
–
8,133
Investments are available for sale financial assets which represent the fair value of loans provided to, and non-equity share capital in, joint venture
veterinary practice companies trading under the Companion Care and Vets4Pets brands, in which the Group’s share interest is non-participatory.
These investments are classified as Available For Sale and accounted for as non-derivative financial assets at fair value.
Under the terms of the loans provided to veterinary practice companies trading under the Companion Care and Vets4Pets brands, no interest is charged
and there is no set date for repayment of the loans due to the Group.
The share capital of the veterinary practice companies is split into either ‘A’ ordinary shares and ‘B’ ordinary shares, or preference shares and ordinary
shares. Any operational decisions require the agreement of the joint venture partner. Under the terms of the agreements between the veterinary
practices and Companion Care (Services) Limited, a subsidiary of the Group, the ‘B’ ordinary shares/ordinary shares which are held by Companion Care
(Services) Limited are not entitled to any profits, losses or dividends, or any surplus on winding up or disposal, although they are entitled to appoint
directors to the board and carry the same shareholder voting rights as ‘A’ ordinary/preference shareholders.
Under the terms of the agreements between the veterinary practices and Vets4Pets Limited, a subsidiary of the Group, the ‘B’ shares which are held
by Vets4Pets Limited are not entitled to any profits, losses or dividends and on winding up or other return of capital the holders of the ‘B’ shares are
entitled (in priority to the holders of the ‘A’ shares) to receive £0.001 in respect of each ‘B’ share held but subject thereto, they are not entitled to receive
any other return of capital which shall be applied for the holders of the A shares. They are entitled to appoint ‘B’ directors to the board and carry the
same shareholder voting rights as ‘A’ shareholders.
Loans to related parties represent longer term funding balances to joint venture partnership businesses. These loans are unsecured, typically for seven
years and attract an interest rate of LIBOR plus 2.8%. The loans are accounted for as loans and receivables and as such are recognised at amortised cost.
Current assets
Financial assets held for trading:
Forward exchange contracts
Loans to related parties
Current liabilities
Financial liabilities held for trading:
Fuel forward contracts
Other financial liability
Finance lease liability
Interest rate swaps
Group
Company
At 31 March
2016
£000
At 26 March
2015
£000
At 31 March
2016
£000
At 26 March
2015
£000
1,290
657
1,947
1,697
–
1,697
–
–
–
–
–
–
Group
Company
At 31 March
2016
£000
At 26 March
2015
£000
At 31 March
2016
£000
At 26 March
2015
£000
(116)
(296)
(63)
(843)
(1,318)
(179)
–
–
(453)
(632)
–
–
–
(843)
(843)
–
–
–
(453)
(453)
141
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
15. Other financial assets and liabilities continued
Non-current liabilities
Other financial liability
Finance lease liability
Interest rate swaps
Group
Company
At 31 March
2016
£000
At 26 March
2015
£000
At 31 March
2016
£000
At 26 March
2015
£000
(5,117)
(16)
(866)
(5,999)
–
–
–
–
–
–
(866)
(866)
–
–
–
–
The non-current other financial liability includes the fair value of the put and call option over the non-controlling interest of a subsidiary undertaking and
contingent consideration in relation to acquisitions. For further detail see note 10.
16. Trade and other receivables
Trade receivables
Other receivables
Amounts owed by Group undertakings
Prepayments and accrued income
Loans to related parties
All balances are included within current assets.
17. Cash and cash equivalents
Cash and cash equivalents
18. Other interest-bearing loans and borrowings
Non-current liabilities
Secured bank loans
Current liabilities
Secured bank loans
Total liabilities
Secured bank loans
142
Group
Company
At 31 March
2016
£000
At 26 March
2015
£000
At 31 March
2016
£000
At 26 March
2015
£000
14,738
22,502
–
21,131
657
59,028
10,036
23,655
–
–
–
–
–
580,493
562,653
17,936
–
–
–
–
–
51,627
580,493
562,653
Group
Company
At 31 March
2016
£000
At 26 March
2015
£000
At 31 March
2016
£000
At 26 March
2015
£000
39,998
132,966
1
1
Group
Company
At 31 March
2016
£000
At 26 March
2015
£000
At 31 March
2016
£000
At 26 March
2015
£000
201,091
315,674
201,091
315,674
–
5,000
–
5,000
201,091
320,674
201,091
320,674
Pets at Home Group PlcAnnual Report and Accounts 2016 Terms and debt repayment schedule
Currency
Nominal
interest rate
Year of
maturity
Face value
at 31 March
2016
£000
Carrying amount
at 31 March
2016
£000
Face value
at 26 March
2015
£000
Carrying amount
at 26 March
2015
£000
Senior Finance Bank Loans
Senior Finance Bank Loans
GBP
GBP
LIBOR
+1.5%
LIBOR
+2–2.25%
2019–2020
202,000
201,091
–
–
2019–2020
–
–
325,000
320,674
In April 2015, the Group’s Senior Financing Facilities were amended, with the introduction of a further revolving credit facility (RCF) with a total facility
amount of £260m. As part of the amendment, £325m of the Group’s term loans under the previous terms of the Senior Financing Facilities were repaid
via drawings under the Group’s RCF along with cash from the Group’s existing resources. The amended RCF expires in April 2020 and is reviewed each
period. Interest is charged at LIBOR plus a margin based on leverage.
Face value represents the principal value of the Senior Finance Bank Loans.
Interest-bearing borrowings are recognised initially at fair value, being the principal value of the loan net of attributable transaction costs. Subsequent to
initial recognition, interest-bearing borrowings are stated at a carrying value, which represents the amortised cost of the loans using the effective interest
method less any impairment losses.
At 31 March 2016 the Group had a revolving credit facility of £260m with a drawn amount of £202m.
The analysis of repayments on the loans is as follows:
Within one year or repayable on demand
Between one and two years
Between two and five years
The combined loans at 31 March 2016 and 26 March 2015 are held by the Company.
Analysis of changes in net debt
Cash and cash equivalents
Debt due within one year at face value
Debt due after one year at face value
Net debt
At 31 March
2016
£000
At 26 March
2015
£000
–
–
202,000
202,000
5,000
12,500
307,500
325,000
At 26 March
2015
£000
132,966
(5,000)
Cash flow
£000
(92,968)
5,000
(320,000)
118,000
(192,034)
30,032
Non-cash
movement
£000
–
–
–
–
At 31 March
2016
£000
39,998
–
(202,000)
(162,002)
143
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
19. Trade and other payables
Current
Trade payables
Accruals and deferred income
Other payables including tax & social security
Corporation tax
Intercompany payables
Non-current
Other payables
Group
Company
At 31 March
2016
£000
At 26 March
2015
£000
At 31 March
2016
£000
At 26 March
2015
£000
79,779
56,578
14,088
9,695
–
77,737
45,054
16,897
5,066
–
160,140
144,754
–
187
–
–
175,551
175,738
–
1,343
–
–
–
1,343
33,165
31,483
–
–
The non-current payables represent deferred income in respect of store leases where incentives are spread over the life of the lease.
The increase in the Company’s intercompany payables balance is a result of the repayment of the loan from the Group’s funds (note 18).
20. Provisions
Balance at 26 March 2015
Provisions made during the period
Provisions used during the period
Balance at 31 March 2016
Current
Non-current
Dilapidation
provision
£000
Closed stores
provision
£000
908
–
(258)
650
1,163
137
(127)
1,173
Total
£000
2,071
137
(385)
1,823
At 31 March
2016
£000
At 26 March
2015
£000
436
1,387
1,823
365
1,706
2,071
The closed stores provision relates to the rent and rates payable on sublet or vacant stores. A provision is made where the rent receivable on the
properties is less than the rent payable, or where management consider there to be a risk on the sublet. The timing of the utilisation of these provisions
is variable dependent upon the lease expiry dates of the properties concerned, which vary between 10 and 15 years. Market conditions have a
significant impact and hence the assumptions on future cash flows are reviewed regularly and revisions to the provision made where necessary.
The Company did not hold any provisions at 31 March 2016 or 26 March 2015.
144
Pets at Home Group PlcAnnual Report and Accounts 2016 21. Capital and reserves
Share capital
Group
At 27 March 2014
Cancellation of share premium
At 26 March 2015
At 31 March 2016
Company
At beginning of period
On issue at period end
At beginning of period
Cancellation of share premium
On issue at period end
Share capital
Number
Share capital
£000
Share premium
£000
500,000,000
5,000
1,080,477
–
–
(1,080,477)
500,000,000
500,000,000
5,000
5,000
–
–
Share capital
31 March 2016
£000
Share premium
31 March 2016
£000
5,000
5,000
–
–
Share Capital
26 March 2015
£000
Share Premium
26 March 2015
£000
5,000
1,080,477
–
(1,080,477)
5,000
–
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of
the Company.
Translation reserve
The translation reserve comprises all foreign exchange differences arising since 21 November 2011, the date of incorporation of Pets at Home Asia Ltd
where the functional currency differs from that of the rest of the Group.
Cash flow hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged
transactions that have not yet occurred.
Share premium reserve
As contemplated in the Pets at Home Group Plc IPO Prospectus dated 28 February 2014 and pursuant to a shareholder resolution passed on
27 February 2014, Pets at Home Group Plc completed a reduction of capital, whereby £1,080,477,000 standing to the credit of the Company’s share
premium account was cancelled, creating distributable reserves of an equivalent amount. The cancellation was formally approved by the High Court and
the court order was registered by the Registrar of Companies and became effective on 30 July 2014. The cancellation has no effect on the overall net
asset position of the Company and/or its Group.
145
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
21. Capital and reserves continued
Other comprehensive income
31 March 2016
Other comprehensive income
Cash flow hedges – reclassified to profit and loss
Effective portion of changes in fair value of cash flow hedges
Deferred tax on changes in fair value of cash flow hedges
Total other comprehensive income
26 March 2015
Other comprehensive income
Cash flow hedges – reclassified to profit and loss
Effective portion of changes in fair value of cash flow hedges
Deferred tax on changes in fair value of cash flow hedges
Total other comprehensive income
Translation
reserve
£000
Cash flow
hedging reserve
£000
Total other
comprehensive
income
£000
(5)
–
–
–
–
(5)
(1,064)
(1,064)
(536)
320
(536)
320
(5)
(1,280)
(1,285)
Translation
reserve
£000
Cash flow
hedging reserve
£000
Total other
comprehensive
income
£000
(4)
–
–
–
(4)
–
1,113
403
(303)
1,213
(4)
1,113
403
(303)
1,209
22. Financial instruments
Financial risk management
The Pets at Home Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and cash flow
interest rate risk), credit risk and liquidity risk.
Risk management framework
Risk management in respect of financial risk is carried out by the Pets at Home Group Treasury Function under policies approved by the Board of
Directors. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board
provides written principles, through its Group Treasury Policy, for overall risk management, as well as written policies covering specific areas, such as
foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments and investment of
excess liquidity.
The main objectives of the Pets at Home Group Treasury Function are:
• To ensure shareholder and management expectations are managed on cash flow and earnings volatility resulting from financial market movements
• To protect the expected cash flow and earnings from interest rate and foreign exchange fluctuations to within parameters acceptable to the Board
and shareholders
• To control banking costs and service levels
Market risk
(i) Foreign currency risk
The Pets at Home Group sources a significant level of purchases in foreign currency, in excess of US $50 million each financial year, and monitors its
foreign currency requirements through short, medium and long term cash flow forecasting. The value of purchases in US dollars continues to increase
each year and the risk management policy has evolved with this increased risk.
At 31 March 2016, the Pets at Home Group’s policy is to hedge between 75% and 90% of the forecast foreign exchange transactions on a rolling 10 to
12 month basis, using foreign currency bank accounts and forward foreign exchange contracts. The transactions are deemed to be ‘highly probable’ and
are based on historical knowledge and forecast purchase and sales projections.
146
Pets at Home Group PlcAnnual Report and Accounts 2016 The Group’s exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments, except for
derivatives which are based on notional amounts:
31 March 2016
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
26 March 2015
Cash and cash equivalents
Trade payables
Forward exchange contracts
Balance sheet exposure
Euro
£000
4
(516)
118
(394)
Euro
£000
293
(446)
(120)
(273)
US Dollar
£000
–
(2,229)
1,172
(1,057)
US Dollar
£000
2,523
(5,178)
1,817
(838)
HKD
£000
2
–
–
2
HKD
£000
2
–
–
2
Total
£000
6
(2,745)
1,290
(1,449)
Total
£000
2,818
(5,624)
1,697
(1,109)
Sensitivity analysis
A 5% weakening of the following currencies against the pound sterling at the period end date in both years would have increased/(decreased) profit or
loss or equity by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk
exposures existing at that date.
This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant.
US Dollar
Euro
Equity
Profit or loss
31 March 2016
£000
26 March 2015
£000
31 March 2016
£000
26 March 2015
£000
(59)
6
(91)
6
111
26
133
(8)
A 5% strengthening of the above currencies against the pound sterling in any period would have had the equal but opposite effect on the above
currencies to the amounts shown above, on the basis that all other variables remain constant.
(ii) Interest rate risk
Cash flow and fair value interest rate risk
The Pets at Home Group’s interest rate risk arises from long-term borrowings. As at 31 March 2016 the Group had a senior facility with a face value
totalling £202.0m. The Pets at Home Group’s borrowings as at 31 March 2016 incur interest at a rate of 1.5% plus LIBOR at current leverage, which
exposes the Group to cash flow interest rate risk. The analysis of loan repayments is detailed in note 18.
The Pets at Home Group’s policy with regard to interest rate risk is to hedge the appropriate level of borrowings by entering into fixed rate agreements.
The Pets at Home Group has entered into two fixed rate interest rate swap agreements over a total of £150m of the senior facility borrowings at the
balance sheet date at a fixed rate of 1.087%. Both swaps expire on 30 March 2017. A further swap was taken out over £85m of the borrowings to cover
the year commencing 31 March 2017 at a fixed rate of 1.639%. The hedges are structured to hedge at least 70% of the forecast outstanding debt for
the next year.
147
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
22. Financial instruments continued
Profile
At the balance sheet date the interest rate profile of the Group’s interest-bearing financial instruments was:
Fixed rate instruments
Financial liabilities
Variable rate instruments
Financial liabilities
Total financial liabilities
Group
Company
Book value
At 31 March
2016
£000
Book value
At 26 March
2015
£000
Book value
At 31 March
2016
£000
Book value
At 26 March
2015
£000
149,091
316,875
149,091
316,875
52,000
3,799
52,000
3,799
201,091
320,674
201,091
320,674
All borrowings bear a variable rate of interest based on LIBOR. Pets at Home Group policy is to hedge at least 70% of the loan to ensure a fixed rate
of interest. Therefore, designated above is the portion of the loan hedged by a fixed rate interest rate swap and the remaining un-hedged portion is
designated as variable rate.
Sensitivity analysis
A change of 50 basis points in interest rates at the period end date would have increased/(decreased) equity and profit or loss by the amounts shown
below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial instruments
with variable interest rates, financial instrument at fair value through profit or loss or available for sale with fixed interest rates and the fixed rate element
of interest rate swaps. The analysis is performed on the same basis for the comparative period.
Equity
Increase
Decrease
Profit or loss
Increase
Decrease
At 31 March
2016
£000
At 26 March
2015
£000
745
(745)
260
(260)
1,584
(1,584)
19
(19)
Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and
arises principally from the Group’s receivables from customers and investment securities.
Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions. The Group
ensures that the banks used for the financing of the loan facilities and interest rate swap agreements hold an acceptable risk rating by independent parties.
The Group has in place certain guarantees over the bank loans taken out by a number of veterinary practice companies in which it holds an investment.
Further details of these guarantees are disclosed in note 26. The performance of the veterinary practice companies is reviewed on an ongoing basis.
Exposure to credit risk
The Group’s maximum exposure to credit risk, being the carrying amount of financial assets, is summarised in the table within the fair values section below.
148
Pets at Home Group PlcAnnual Report and Accounts 2016 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
Management prepares and monitors rolling forecasts of the Group’s cash balances based on expected cash flows to ensure, as far as possible, that it
will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without risking damage to the Group’s reputation.
Covenants are monitored on a regular basis to ensure there is no risk or breach which would lead to an ‘Event of Default’ and compliance certificates are
issued as required to the syndicate agent.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
Group
31 March 2016
Non-derivative financial liabilities
Secured bank loans (note 18)
Trade payables (note 19)
Finance lease liabilities
Other financial liabilities
Derivative financial liabilities
Forward exchange contracts used for hedging:
Outflow (note 15)
Interest rate swaps used for hedging:
Outflow (note 15)
Fuel forward contracts:
Outflow (note 15)
Carrying
amount
£000
Contractual
cash flows
£000
1 year
or less
£000
1 to
<2 years
£000
2 to
<5 years
£000
5 years
and over
£000
201,091
79,779
79
5,413
202,000
79,779
79
5,724
–
79,779
63
296
–
–
–
1,709
1,709
843
116
116
288,187
289,407
116
81,097
–
–
16
–
–
866
–
882
202,000
–
–
5,428
–
–
–
207,428
–
–
–
–
–
–
–
–
The following are the contractual maturities of financial liabilities, including estimated interest payments:
Group
26 March 2015
Non-derivative financial liabilities
Secured bank loans (note 18)
Trade payables (note 19)
Derivative financial liabilities
Forward exchange contracts used for hedging:
Outflow (note 15)
Interest rate swaps used for hedging:
Outflow (note 15)
Fuel forward contracts:
Outflow (note 15)
Carrying
amount
£000
Contractual
cash flows
£000
1 year
or less
£000
1 to
<2 years
£000
2 to
<5 years
£000
5 years
and over
£000
320,674
77,737
350,763
77,737
12,844
77,737
–
453
179
–
453
179
399,043
429,132
–
453
179
91,213
19,313
318,606
–
–
–
–
–
–
–
–
19,313
318,606
–
–
–
–
–
–
149
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
22. Financial instruments continued
Company
31 March 2016
Non-derivative financial liabilities
Secured bank loans (note 18)
Derivative financial liabilities
Interest rate swaps (note 15)
26 March 2015
Non-derivative financial liabilities
Secured bank loans (note 15)
Derivative financial liabilities
Interest rate swaps (note 15)
Carrying
amount
£000
Contractual
cash flows
£000
1 year
or less
£000
1 to
<2 years
£000
2 to
<5 years
£000
5 years
and over
£000
201,091
202,000
1,709
1,709
202,800
203,709
–
843
843
–
202,000
866
866
–
202,000
–
–
–
Carrying
amount
£000
Contractual
cash flows
£000
1 year
or less
£000
1 to
<2 years
£000
2 to
<5 years
£000
5 years
and over
£000
320,674
350,763
12,844
19,313
318,606
453
453
321,127
351,216
453
13,297
–
–
19,313
318,606
–
–
–
Cash flow hedges
The following table indicates the periods in which the cash flows associated with cash flow hedging instruments are expected to occur and to affect profit
or loss:
Carrying
amount
£000
Expected
cash flows
£000
–
–
(1,709)
(1,709)
1,340
(50)
(116)
(535)
1,340
(50)
(116)
(535)
1 year
or less
£000
–
(843)
1,340
(50)
(116)
331
1 to
<2 years
£000
2 to
<5 years
£000
5 years
and over
£000
–
(866)
–
–
–
(866)
–
–
–
–
–
–
–
–
–
–
–
–
Group
31 March 2016
Interest rate swaps:
Assets (note 15)
Liabilities (note 15)
Forward exchange contracts:
Assets (note 15)
Liabilities (note 15)
Fuel forward contracts:
Liabilities (note 15)
150
Pets at Home Group PlcAnnual Report and Accounts 2016 Group
26 March 2015
Interest rate swaps:
Assets (note 15)
Liabilities (note 15)
Forward exchange contracts:
Assets (note 15)
Liabilities (note 15)
Fuel forward contracts:
Liabilities (note 15)
Company
31 March 2016
Interest rate swaps:
Liabilities (note 15)
26 March 2015
Interest rate swaps:
Liabilities (note 15)
Carrying
amount
£000
Expected
cash flows
£000
–
(453)
1,817
(120)
(179)
1,065
–
(453)
1,817
(120)
(179)
1,065
Carrying
amount
£000
Expected
cash flows
£000
(1,709)
(1,709)
(1,709)
(1,709)
Carrying
amount
£000
Expected
cash flows
£000
(453)
(453)
(453)
(453)
1 year
or less
£000
–
(453)
1,817
(120)
(179)
1,065
1 year
or less
£000
(843)
(843)
1 year
or less
£000
(453)
(453)
1 to
<2 years
£000
2 to
<5 years
£000
5 years
and over
£000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 to
<2 years
£000
2 to
<5 years
£000
5 years
and over
£000
(866)
(866)
–
–
–
–
1 to
<2 years
£000
2 to
<5 years
£000
5 years
and over
£000
–
–
–
–
–
–
Fair values of financial instruments
Investments
The fair value of investments is considered to be its carrying value as the impact of discounting future cash flows has been assessed as not material and
the investment is non-participatory.
Trade and other payables and receivables
The fair value of these items is considered to be its carrying value as the impact of discounting future cash flows has been assessed as not material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on
demand (such as term deposits), then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at
the balance sheet date.
Long-term and short-term borrowings
The fair value of bank loans and other loans approximates its carrying value as it has an interest rate based on LIBOR.
151
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
22. Financial instruments continued
Short-term deposits
The fair value of short term deposits is considered to be their carrying value as the balances are held in floating rate accounts where the interest rate
is reset to market rates.
Derivative financial instruments
The fair value of interest rate swap contracts and forward exchange contracts is calculated by management based on external valuations received from
the Group’s bankers and is based on forward exchange rates and anticipated future interest yield respectively.
Contingent consideration
Contingent consideration on acquisition of a subsidiary is valued at fair value at the time of acquisition. Any subsequent changes in fair values are
recognised in profit or loss.
Put and call options over non-controlling interests
Put and call options over non-controlling interests are recognised at fair value at the acquisition date and included within the valuation of goodwill.
Subsequent changes to fair value are recognised in profit or loss.
Fair values
The fair values of all financial assets and financial liabilities by class together with their carrying amounts shown in the balance sheet are as follows:
Financial assets held for trading (including all derivatives)
Forward exchange contracts (note 15)
Available for sale financial assets
Investment in non-equity share capital and loans (note 15)
Total financial assets at fair value through profit or loss
Loans and receivables
Cash and cash equivalents (note 17)
Trade and other receivables (note 16)
Total loans and receivables
Total financial assets
Financial liabilities (including all derivatives)
Interest rate swaps (note 15)
Fuel forward contracts (note 15)
Other financial liabilities
Total financial liabilities at fair value through profit or loss
Financial liabilities measured at amortised cost
31 March 2016
Carrying
amount
£000
Fair
value
£000
26 March 2015
Carrying
amount
£000
Fair
value
£000
1,290
1,290
1,697
1,697
9,143
10,433
39,998
59,028
99,026
9,143
10,433
39,998
59,028
99,026
109,459
109,459
8,133
9,830
8,133
9,830
132,966
51,627
184,593
194,423
132,966
51,627
184,593
194,423
(1,710)
(116)
(5,413)
(7,239)
(1,710)
(116)
(5,413)
(7,239)
(453)
(179)
–
(632)
(453)
(179)
–
(632)
Other interest-bearing loans and borrowings (note 18)
(201,091)
(201,091)
(320,674)
(320,674)
Trade and other payables (note 19)
(160,140)
(160,140)
(176,237)
(176,237)
Total financial liabilities measured at amortised cost
(361,231)
(361,231)
(496,911)
(496,911)
Total financial liabilities
Total financial instruments
(368,470)
(368,470)
(497,543)
(497,543)
(259,011)
(259,011)
(303,120)
(303,120)
152
Pets at Home Group PlcAnnual Report and Accounts 2016 Company
Loans and receivables
Cash and cash equivalents (note 17)
Trade and other receivables (note 16)
Total loans and receivables
Total financial assets
Financial assets held for trading (including all derivatives)
Interest rate swaps (note 15)
Total financial assets at fair value through profit or loss
Financial liabilities measured at amortised cost
31 March 2016
Carrying
amount
£000
Fair
value
£000
27 March 2015
Carrying
amount
£000
Fair
value
£000
1
580,493
580,494
580,494
1
580,493
580,494
580,494
1
562,653
562,654
562,654
1
562,653
562,654
562,654
(1,709)
(1,709)
(1,709)
(1,709)
(453)
(453)
(453)
(453)
Other interest-bearing loans and borrowings (note 18)
(201,091)
(201,091)
(320,674)
(320,674)
Trade and other payables (note 19)
Total financial liabilities at amortised cost
Total financial liabilities
Total financial instruments
(175,738)
(175,738)
(1,343)
(1,343)
(376,829)
(376,829)
(322,017)
(322,017)
(378,538)
(378,538)
(322,017)
(322,017)
201,956
201,956
240,637
240,637
Fair value hierarchy
The table below analyses financial instruments measured at fair value into a fair value hierarchy based on the valuation technique used to determine
fair value.
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Group
31 March 2016
Available for sale financial assets
Investments
Derivative financial assets
Forward rate contracts
Derivative financial liabilities
Interest rate swaps
Fuel forward contracts
Other financial liabilities
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
–
–
–
–
–
–
9,143
9,143
1,290
(1,709)
(116)
–
–
–
–
(5,413)
1,290
(1,709)
(116)
(5,413)
153
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
22. Financial instruments continued
26 March 2015
Available for sale financial assets
Investments
Derivative financial assets
Forward rate contracts
Derivative financial liabilities
Interest rate swaps
Fuel forward contracts
Company
31 March 2016
Derivative financial liabilities
Interest rate swaps
26 March 2015
Derivative financial liabilities
Interest rate swaps
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
–
–
–
–
–
8,133
8,133
1,697
(453)
(179)
–
–
–
1,697
(453)
(179)
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
–
(1,709)
–
(1,709)
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
–
(453)
–
(453)
Capital management
The Group’s objectives when managing capital, which is deemed to be total equity plus total debt, are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders, through the optimisation of the debt and equity balance,
and to maintain a strong credit rating and headroom on financial covenants. The Group manages its capital structure and makes appropriate decisions
in light of the current economic conditions and strategic objectives of the Group.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development
of the Group.
The funding requirements of the Group are met by the utilisation of external borrowings together with available cash, as detailed in note 18.
A key objective of the Group’s capital management is to maintain compliance with the covenants set out in the Senior Financing Facilities and to maintain
a comfortable level of headroom over and above these requirements.
Management have continued to measure and monitor covenant compliance throughout the period and the Group has complied with the requirements set.
23. Share based payments
At 31 March 2016, the Group has four share award plans all of which are equity settled schemes.
1. The Co-Invest Plan (CIP)
On 25 February 2014 the Company adopted the Co-Invest Plan (CIP). Matching awards under the CIP (as described in section 1(b) below) were made on
17 March 2014 to Executive Directors and the Senior Executives by reference to corresponding investment pledges by those colleagues.
These matching awards will vest over a period of three years subject to the satisfaction of performance conditions and once vested as to performance,
will become exercisable in equal one-third tranches in years three, four and five subject to continued employment with the Group. These awards were
granted at nil cost.
(a) Eligibility
Only the Executive Directors, the Senior Executives and certain other senior colleagues were selected to participate in the CIP.
154
Pets at Home Group PlcAnnual Report and Accounts 2016 (b) Type of awards
Colleagues were invited to participate in the CIP by making an ‘investment’ or ‘pledge’ of their own shares (the “Co-Invest Shares”), which could include
existing, locked-in shares or new shares acquired with cash, in return for a nil cost-matching award over shares (the “Matching Award”).
Matching Awards will be granted by reference to a ratio not exceeding one matched share for every Co-Invest Share ‘pledged’. Matching Awards under the
CIP will not form part of a participant’s pensionable earnings and are not transferable other than on death.
(c) Individual limits
The Executive Directors and the Senior Executives will pledge Co-Invest Shares with a market value equal to 2.5 times their annual salary. Other senior
colleagues who elect to participate in the CIP will pledge Co-Invest Shares with a market value equal to a limit specified by the Remuneration Committee,
but not exceeding 1 times their annual salary.
(d) Performance, vesting and performance adjustment
The Matching Awards granted on 17 March 2014 vest subject to the satisfaction of the performance conditions outlined below. To the extent that any
future awards are granted, different conditions may apply (in the absolute discretion of the Remuneration Committee).
The performance conditions are as follows:
• 75% of the Matching Award will be subject to the CAGR in the Company’s earnings per share (“EPS”) over three financial years, namely FY15, FY16
and FY17 (together the “Performance Period”) (which, for the avoidance of doubt, ends on 30 March 2017). If the CAGR in the Company’s EPS is
10%, then 10% of the total Matching Award will vest. If the CAGR in the Company’s EPS is 17.5% or more, then 75% of the total Matching Award will
vest. Vesting will be on a straight-line basis between these two points. For the avoidance of doubt, if the CAGR in EPS is less than 10% over the
Performance Period then the amount of the Matching Award which will vest under this EPS performance condition will be nil.
• 25% of the total Matching Award will be subject to the Company’s total shareholder return (“TSR”) as compared to a comparator group made up of
a selected group of retail companies over the Performance Period. Vesting of 6.25% of the total Matching Award will occur for median performance.
Vesting of the maximum 25% of the total Matching Award will occur for upper quartile performance or above. Vesting will occur on a straight-line
basis between these two points. If the Company’s TSR performance over the Performance Period is below median, then the amount of the Matching
Award which will vest under this TSR performance condition will be nil.
• To the extent vested as to performance, Matching Awards will become exercisable in three equal amounts on the third, fourth and fifth anniversary
of 17 March 2014, but subject to continued employment with the Group.
2. CSOP
On 25 February 2014 the Company adopted the CSOP. Part I of the CSOP is tax approved under Schedule 4 to the Income Tax (Earnings and Pensions)
Act 2003 and provides for the grant of tax approved options. Part II of the CSOP provides for the grant of unapproved options.
The tax approved options under Part I of the CSOP will be exercisable between the third and tenth anniversary of the date of grant, subject to continued
employment with the Group. These awards will be granted with an exercise price equal to the market value of the shares at the grant date (as agreed
with HMRC).
(a) Eligibility
All colleagues, including the Executive Directors and Senior Executives, are eligible to participate in the CSOP, at the discretion of the Remuneration
Committee.
(b) Grant of options
No options may be granted more than ten years after the adoption of the CSOP. Options under the CSOP will not form part of a colleague’s
pensionable earnings.
(c) Vesting and performance
Colleagues who receive options under the CSOP and under the PSP in connection with Admission will be subject to the same performance conditions
described in Section 1 (d) above in respect of both grants. Colleagues who only receive options under the CSOP in connection with Admission will not
be subject to performance conditions.
(d) Exercise price
The price at which an option holder may acquire shares on the exercise of an option shall be determined by the Board but shall not be less than the
greater of market value of a share at the time of grant and its nominal value.
155
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
23. Share based payments continued
(e) Individual limits
No option may be granted to an eligible colleague under Part I of the CSOP which would result in the aggregate exercise prices of shares comprised in
all outstanding options granted to him/her under Part I, when aggregated with outstanding options held under any other tax approved executive share
option scheme established by the Company, exceeding the tax approved limit (currently £30,000).
In addition, (both under Part I and II of the CSOP) the aggregate exercise price of shares comprised in options granted to a colleague under the CSOP
and the PSP in any financial year shall not exceed 150% of his/her annual salary for that year.
For the purposes of these limits, market value will be calculated by reference to the market value of the shares on or prior to the relevant date of grant
as determined by the Board (following consultation with the Remuneration Committee) and subject to HMRC approval if applicable.
(l) Part II
Part II of the CSOP provides for the grant of unapproved options. This enables options to be granted under the same terms as Part I of the CSOP but
without complying with the particular requirements of the legislation applicable to tax approved CSOP Schemes. The provisions of the CSOP that do
not apply under Part II include the £30,000 limit and the need to seek HMRC approval for the scheme and subsequent amendments (as applicable).
3. PSP
On 25 February 2014 the Company adopted the PSP. Awards under the PSP were made on 17 March 2014 and annually thereafter and will be
exercisable between the third and tenth anniversary of this date, subject to continued employment with the Group and the satisfaction of performance
conditions. These awards were granted at nil cost.
(a) Eligibility
Only the Executive Directors, the Senior Executives and certain other senior colleagues selected to participate in the PSP.
(b) Grant of awards
Awards under the PSP will not form part of a colleague’s pensionable earnings. Awards are not transferable (other than on death) without the consent
of the Remuneration Committee.
(c) Exercise price
The price at which a colleague may acquire shares on the exercise or vesting of an award under the PSP shall be determined by the Remuneration
Committee on the date of grant, and may, if the Remuneration Committee determines, be nil or nominal value only.
(d) Scheme limits
The number of newly issued shares over which (or in respect of which) awards may be granted under the PSP on any date shall be limited so that: (i) the
total number of shares issued and issuable in respect of options or awards granted in any ten year period under the PSP and any other discretionary
share option scheme of the Company (including the CIP and the CSOP but other than to satisfy dividend equivalent payments) is restricted to 5% of the
Company’s issued shares calculated at the relevant time; and (ii) the total number of shares issued and issuable pursuant to options or awards granted
in any ten year period under the PSP and any other employee share scheme operated by the Company (including the CIP, CSOP, SAYE and SIP but other
than to satisfy dividend equivalent payments) is restricted to 10% of the Company’s issued shares calculated at the relevant time.
For the purposes of these limits, no account will be taken of options or awards granted before, on or in connection with Admission and no account will
be taken of options or awards which have lapsed, been surrendered or otherwise become incapable of exercise or vesting. Shares held in treasury will
be treated as newly issued shares for the purposes of these limits (as long as this is required by institutional investor guidelines), but (for the avoidance
of doubt) shares acquired in the market will not.
(e) Individual limits
The aggregate market value of shares comprised in awards granted to a colleague under the PSP and the CSOP in any financial year shall not exceed
150% of their annual salary for that year.
For the purposes of awards granted on (or before) Admission, market value for these purposes will be calculated by reference to the Offer Price. For the
purposes of awards granted following Admission, market value for these purposes will be calculated by reference to the market value of the shares on
the relevant date of grant as determined by the Board (following consultation with the Remuneration Committee) in its absolute discretion.
(f) Performance
For awards granted on, or in connection with, Admission, the performance conditions will be the same as for the CIP outlined in Section 1(d) above.
156
Pets at Home Group PlcAnnual Report and Accounts 2016 4. SAYE
On 25 February 2014, the Company adopted the SAYE (which was registered with and self-certified with HMRC on 4 April 2015). The rules of the
SAYE were adopted pursuant to Schedule 3 of the Income Tax (Earnings and Pensions) Act 2003 and provide for the grant of tax approved options.
In September each year, the Company issues invitations under the rules of the SAYE which provides eligible colleagues with an opportunity to receive
share options at a 20% discount to the market price. The maximum monthly savings is £500 per month. The Executive Directors have elected to
participate in the Sharesave, along with 21% of eligible colleagues.
The options were granted in September 2014 and September 2015 and in normal circumstances they are not exercisable until completion of a three
year savings period, beginning on 1 December each year and will then be exercisable for a period of six months following completion of the relevant
savings period.
(a) Eligibility
All colleagues and full-time Directors of the Group, who have been in continuous service for such period of time (not exceeding five years) as may be
determined by the Board prior to the relevant date of grant of an option and who are liable to UK income tax, are eligible to participate in the SAYE.
Participation may also be offered, at the discretion of the Board (taking account of the recommendations of the Remuneration Committee), to other
Directors or employees who otherwise do not satisfy all of the above criteria, although Non-Executive Directors are not eligible to participate in the SAYE.
(b) Issue of invitations
Invitations to participate in the SAYE may be made during each 42 day period from (and including) (i) the date on which any amendment to the SAYE
is approved or adopted by the Company’s shareholders, (ii) the announcement of the Company’s final or interim results for any financial period, (iii) the
occurrence of an event which the Remuneration Committee considers to be an exceptional event concerning the Group or (iv) changes to the legislation
affecting tax approved SAYE option schemes coming into effect. If any of the above periods is a ‘close period’ as a result of the application of the Model
Code for Securities Transactions by Directors of Listed Companies (or as a result of the Company’s equivalent internal share dealing rules) and the
Company is prohibited from issuing invitations and/or granting options as a result, then invitations may be made within 42 days of the end of the
close period.
Invitations may be issued by the trustee of an employee benefit trust. No invitations may be issued or options granted more than ten years after the
adoption of the SAYE.
(c) Exercise price
The price at which an option holder may acquire shares on the exercise of an option shall be determined by the Board but shall not be less than the
greater of 80% of the market value of a share at the time of grant and its nominal value.
(d) Savings contract
Options may be granted by the Board or the trustee of an employee benefit trust. Upon applying for an option, the colleague will be required to enter
into an approved savings contract with a savings institution nominated by the Company which lasts for either three or five years. The maximum amount
which an employee is permitted to contribute under SAYE contracts is £500 per month. The Board may set lower savings limits than this for different
colleagues by reference to objective criteria such as levels of salary or length of service. The minimum contribution is £5 per month (or such greater
amount as the Board may specify, not to exceed £10). The total exercise price of the shares over which the option is granted may not exceed the
aggregate of the monthly contributions and bonus payable at the end of the colleague’s related SAYE contract.
(e) Scheme limits
The number of newly issued shares over which (or in respect of which) options may be granted under the SAYE on any date of grant shall be limited so
that the total number of shares issued or capable of being issued in any ten year period under all the Company’s employee share schemes (including the
CIP, CSOP, PSP and SIP but other than to satisfy dividend equivalent payments) is restricted to 10% of the Company’s issued shares calculated at the
relevant time. Any options or rights to acquire shares granted before, on or in connection with Admission will be excluded from this limit, and no account
will be taken of options or awards which have lapsed, been surrendered or otherwise become incapable of exercise or vesting.
(f) Exercisability
Options will normally be exercisable during a period of six months following the allocation of a bonus under the related SAYE contract and will normally
lapse upon cessation of employment. Earlier exercise is, however, permitted if the colleague dies or leaves employment through injury, disability,
redundancy or retirement or where a colleague leaves employment of the Group by reason of his employing company ceasing to be a member of
the Group, or if the undertaking in which he is employed is sold outside the Group. Early exercise will also be permitted in the event of a takeover,
reconstructions or voluntary winding up of the Company.
157
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
23. Share based payments continued
Fair value of share awards
The expected volatility is based on historical volatility of a peer group of companies over a relevant period prior to award. The expected life is the average
expected period to exercise, which has been taken as three years. The risk free rate of return is the yield on zero-coupon UK government bonds with a life
equal to this expected life.
Options are valued using a Black-Scholes option-pricing model for the non-market based (EPS element) performance conditions and a Monte-Carlo
simulation for the market-based (TSR element) performance conditions.
Special provisions allow early exercise in the case of death, injury, disability, redundancy, retirement or because the Company which employs the option
holder ceases to be part of the Group, or in the event of a change in control, reconstruction or winding up of the Company.
The key assumptions used in the fair value of the awards were as follows:
At grant date
Share price
Exercise price
Expected volatility
Option life (years)
Expected dividend yield
Risk free interest rate
Weighted average fair value
of options granted
CIP
£2.45
£0.00
30%
3
2.00%
1.07%
£2.06
PSP
2016
PSP
2015
£2.75
£0.00
30%
10
2.00%
1.07%
£2.06
£2.45
£0.00
30%
10
2.00%
1.07%
£2.06
CSOP
2016
£2.75
£2.75
32%
10
2.00%
2.25%
£0.89
CSOP
2015
£2.31
£2.31
37%
10
2.00%
2.25%
£0.75
£2.88
£2.30
30%
2
2.00%
1.07%
£0.75
SAYE
2016
SAYE
2015
As both the CIP and PSP awards have a nil exercise price the risk free rate of return does not have any effect on the estimated fair value.
Movements in awards under share based payment schemes:
Outstanding at start of year
Granted
Forfeited
Exercised
Lapsed
Outstanding at end of year
CIP
’000
2,454
–
–
–
(389)
2,065
PSP
’000
304
3,256
–
–
(386)
3,174
CSOP
’000
1,900
2,910
–
–
(272)
4,538
The Group income statement charge recognised in respect of share based payments for the current period is £3,005,000 (2015: £1,657,000).
158
£1.75
£1.40
30%
3
2.00%
1.07%
£0.47
SAYE
’000
3,056
1,424
–
–
(333)
4,147
Pets at Home Group PlcAnnual Report and Accounts 2016 24. Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
Land and buildings
Other
At 31 March
2016
£000
At 26 March
2015
£000
At 31 March
2016
£000
At 26 March
2015
£000
73,346
274,599
234,270
582,215
66,866
256,155
241,851
564,872
3,738
5,171
125
9,034
3,292
6,507
144
9,943
Land and buildings relate to the hire of stores and other trading properties under operating leases. No lease is considered individually significant.
During the period ended 31 March 2016 £74,291,000 was recognised as an expense in the income statement in respect of operating leases
(period ended 26 March 2015: £70,122,000).
The Company does not have any operating leases.
Sublease income
The Group has a number of leases on properties from which it no longer trades. These properties are often sublet to third parties at contracted rates.
The income is recognised within selling and distribution expenses in line with the rents payable as set out in the rental agreements. Sublease income
commitments set out below exclude rentals charged to veterinary practices within Pets at Home stores (see note 27).
Less than one year
Between one and five years
More than five years
At 31 March
2016
£000
At 26 March
2015
£000
954
3,664
548
5,166
1,008
3,652
2,060
6,720
25. Commitments
Capital commitments
At 31 March 2016, the Group is committed to incur capital expenditure of £978,000 (26 March 2015: £1,272,000). Capital commitments predominantly
relate to the costs to fit out new Pets at Home stores and investment in new IT systems.
26. Contingencies
Veterinary practices
Provisions are maintained by the Group, where necessary, against certain balances held with the veterinary practices. During the period, the Group
also had in place certain guarantees over the bank loans taken out by a number of veterinary practice companies in which it holds an investment in
non-participatory share capital. At the end of the period, the total amount of bank overdrafts and loans guaranteed by the Group amounted to
£5,815,000 (26 March 2015: £5,845,000).
159
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
27. Related parties
Veterinary practice transactions
The Group has entered into a number of arrangements with third parties in respect of veterinary practices. These veterinary practices are deemed to
be related parties due to the factors explained in note 1.4.
Commitments relating to these veterinary practices are included within notes 25 and 26.
The transactions entered into during the period, and the balances outstanding at the end of the period are as follows:
Transactions
– Fees for services provided to veterinary practices
– Rental charges to veterinary practices
Balances
– Due from veterinary practice companies at end of period included within other receivables
– Loan due from veterinary practices at end of period
31 March 2016
£000
26 March 2015
£000
42,935
10,171
8,929
1,674
28,249
7,056
17,334
–
Goods and services
KKR Capital Markets Ltd received fees of £500,000 (period ended 26 March 2015: £nil), relating to professional services associated with debt financing
following the refinancing of the Pets at Home Group in April 2015.
28. Subsequent events
Acquisition of Eye Vet Limited
Subsequent to the period end, on 5 April 2016 Pets at Home Veterinary Specialist Group Ltd, a subsidiary of Pets at Home Group Plc, acquired 90%
of the issued share capital of Eye Vet Limited, in exchange for a cash consideration of £1.1m. Eye Vet Limited is a company registered in England
and Wales and is a dedicated ophthalmology practice based in the North West of England. It has a small team of six clinicians who specialise in
ophthalmology. The practice makes no contribution to these financial statements, due to the transaction completing subsequent to the period end.
The financial statements of Pets at Home Group Plc for the 52 week period to 30 March 2017, will include full disclosure in accordance with IFRS 3
of consideration paid or payable, the fair value of net assets acquired, goodwill recognised, and acquisition related costs, at such time as the initial
accounting for the business combination is complete.
Acquisition of Dick White Referrals Limited
Subsequent to the period end, on 28 April 2016 Pets at Home Veterinary Specialist Group Ltd, a subsidiary of Pets at Home Group Plc, acquired 76%
of the issued share capital of Dick White Referrals Limited, in exchange for a cash consideration of £13.8m. Dick White Referrals Limited is a company
registered in England and Wales and is one of Europe’s leading veterinary referral centres. Based near Cambridge, it is a multi-disciplinary practice
founded by Professor Dick White and has 66 referral clinicians of who 31 are Specialists. The practice makes no contribution to these financial
statements, due to the transaction completing subsequent to the period end. No fair value disclosure has been made in these financial statements
as the acquisition balance sheet is still in the process of being compiled under the terms of the SPA.
The financial statements of Pets at Home Group Plc for the 52 week period to 30 March 2017 will include full disclosure in accordance with IFRS 3
of consideration paid or payable, the fair value of net assets acquired, goodwill recognised, and acquisition related costs, at such time as the initial
accounting for the business combination is complete. No fair value disclosure has been made in this set of accounts as the acquisition balance sheet
is still in the process of being compiled under the terms of the SPA.
160
Pets at Home Group PlcAnnual Report and Accounts 2016 29. Investments in subsidiaries
Company
At 31 March 2016 and 26 March 2015
Group
Details of the principal subsidiary undertakings are as follows:
Company
Anderson Moores Veterinary Specialists Ltd
Brand Development Limited
Companion Care (Services) Limited
Companion Care Management Services Limited
Farm-Away Limited
Les Boues Limited
Northwest Surgeons Limited
PAH Pty Limited
Pet Investments Limited
Pets At Home (Asia) Limited
Pets At Home Financial Services Limited
Pets At Home Holdings Limited
Pets At Home Limited
Pets At Home No.1 Limited
Pets At Home Superstores Limited
Pets At Home Veterinary Specialist Group Limited
Pets At Home Vets Group Limited
Ride-Away (York) Limited
Vets for Pets Limited
Vets4Pets GB Limited
Kestrel Debt Recovery Limited
Pets at Home (ESOT) Limited
Pet City Holdings Limited
Pet City Limited
Pet City Resources Limited
Vets 4 Pets Limited
Vets4Pets (Services) Limited
Vets4Pets Holdings Limited
Vets4Pets I.P. Limited
Vets4Pets Services Limited
Vets4Pets Uk Limited
Vets4Pets Limited
Vets4Pets Veterinary Group Limited
Accrington Vets4Pets Limited
Alsager Vets4Pets Limited
Amesbury Vets4Pets Limited
Investment in
subsidiaries
£000
936,179
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
Guernsey
United Kingdom
United Kingdom
United Kingdom
Jersey
United Kingdom
Australia
United Kingdom
Hong Kong
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Guernsey
Guernsey
United Kingdom
United Kingdom
Guernsey
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
100
161
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
50
–
100
–
100
100
100
–
–
–
100
100
100
100
100
–
–
100
100
–
100
100
100
–
100
100
100
Company
Bagshot Vets4Pets Limited
Bath Vets4Pets Limited
Bedlington Vets4Pets Limited
Bishop Auckland Vets4Pets Limited
Bradford Vets4Pets Limited
Burton-On-Trent Vets4Pets Limited
Cambridge Perne Road Vets4Pets Limited
Canterbury Sturry Vets4Pets Limited
Carmarthen Vets4Pets Limited
Chorley Vets4Pets Limited
Colchester Layer Road Vets4Pets Limited
Companion Care (Chester Caldy) Limited
Companion Care (Ilford) Limited
Companion Care (Kendal) Limited
Companion Care (Nottingham) Limited
Companion Care (Oxford) Limited
Companion Care (Thamesmead) Limited
Crosby Vets4Pets Limited
Ellesmere Port Vets4Pets Limited
Falkirk Vets4Pets Limited
Haverfordwest Vets4Pets Limited
Kingswood Vets4Pets Limited
Leicester St Georges Vets4Pets Limited
Leyland Vets4Pets Limited
Linlithgow Vets4Pets Limited
Littleover Vets4Pets Limited
Long Eaton Vets4Pets Limited
Melton Mowbray Vets4Pets Limited
Mexborough Vets4Pets Limited
New Milton Vets4Pets Limited
Newmarket Vets4Pets Limited
Newtownards Vets4Pets Limited
Nottingham Netherfield Vets4Pets Limited
Rawtenstall Vets4Pets Limited
Rhyl Vets4Pets Limited
Ripon Vets4Pets Limited
Rugby Central Vets4Pets Limited
Salford Vets4Pets Limited
Scunthorpe Vets4Pets Limited
Sheffield Heeley Vets4Pets Limited
Somercotes Vets4Pets Limited
Stoke-On-Trent Vets4Pets Limited
162
Pets at Home Group PlcAnnual Report and Accounts 2016 Company
Sudbury Vets4Pets Limited
Teesside Vets4Pets Limited
Telford Madeley Vets4Pets Limited
Thamesmead Vets4Pets Limited
Walton On Thames Vets4Pets Limited
Warminster Vets4Pets Limited
Worthing Vets4Pets Limited
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
–
–
–
–
100
–
–
The Group holds an indirect interest in the share capital of the following companies:
Company
Aberdeen Vets4Pets Limited
Abtw Limited
Airdrie Vets4Pets Limited
Alton Vets4Pets Limited
Altrincham Vets4Pets Limited
Andover Vets4Pets Limited
Bangor Vets4Pets Limited
Bangor Wales Vets4Pets Limited
Barnsley Vets4Pets Limited
Barnwood Vets4Pets Limited
Barry Vets4Pets Limited
Bearsden Vets4Pets Limited
Bedford Vets4Pets Limited
Bedminster Vets4Pets Limited
Beeston Vets4Pets Limited
Belfast Stormont Vets4Pets Limited
Biggleswade Vets4Pets Limited
Bishops Stortford Vets4Pets Limited
Bishopston Vets4Pets Limited
Blackheath Vets4Pets Limited
Blackpool Squires Gate Vets4Pets Limited
Blackpool Warbreck Vets4Pets Limited
Blackwood Vets4Pets Limited
Borehamwood Vets4Pets Limited
Bramley Vets4Pets Limited
Bristol Emerson Green Vets4Pets Limited
Bristol Kingswood Vets4Pets Limited
Bromsgrove Vets4Pets Limited
Buckingham Vets4Pets Limited
Bulwell Vets4Pets Limited
Bury St Edmunds Vets4Pets Limited
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
United Kingdom
Ordinary
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
–
50
50
50
50
50
100
100
50
50
100
50
100
100
–
50
50
–
50
–
50
50
50
50
50
50
50
50
163
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
50
100
100
50
50
50
50
50
100
50
50
–
100
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
Company
Bury Vets4Pets Limited
Byfleet Vets4Pets Limited
Caerphilly Vets4Pets Limited
Camborne Vets4Pets Limited
Cannock Vets4Pets Limited
Cardiff Ely Vets4Pets Limited
Cardiff Newport Road Vets4Pets Limited
Carlisle Vets4Pets Limited
Carrickfergus Vets4Pets Limited
Castleford Vets4Pets Limited
Catterick Vets4Pets Limited
Chadwell Heath Vets4Pets Limited
Cheadle Hulme Vets4Pets Limited
Chester Vets4Pets Limited
Chesterfield Vets4Pets Limited
Cirencester Vets4Pets Limited
Clevedon Vets4Pets Limited
Cleveleys Vets4Pets Limited
Clifton Vets4Pets Limited
Clitheroe Vets4Pets Limited
Colne Vets4Pets Limited
Companion Care (Aintree) Limited
Companion Care (Andover) Limited
Companion Care (Ashford) Limited
Companion Care (Ashton) Limited
Companion Care (Aylesbury) Limited
Companion Care (Ayr) Limited
Companion Care (Ballymena) Limited
Companion Care (Banbury) Limited
Companion Care (Barnsley Cortonwood) Limited
Companion Care (Basildon Pipps Hill) Limited
Companion Care (Basildon) Limited
Companion Care (Basingstoke) Limited
Companion Care (Beckton) Limited
Companion Care (Bedford) Limited
Companion Care (Belfast) Limited
Companion Care (Bishopbriggs) Limited
Companion Care (Bletchley) Limited
Companion Care (Bolton) Limited
Companion Care (Bournemouth) Limited
Companion Care (Braintree) Limited
Companion Care (Brentford) Limited
164
Pets at Home Group PlcAnnual Report and Accounts 2016 Company
Companion Care (Bridgend) Limited
Companion Care (Bridgwater) Limited
Companion Care (Brislington) Limited
Companion Care (Bristol Filton) Limited
Companion Care (Broadstairs) Limited
Companion Care (Burgess Hill) Limited
Companion Care (Cambridge Beehive) Limited
Companion Care (Cambridge) Limited
Companion Care (Cannock) Limited
Companion Care (Canterbury) Limited
Companion Care (Cardiff) Limited
Companion Care (Charlton) Limited
Companion Care (Chatham) Limited
Companion Care (Chelmsford) Limited
Companion Care (Cheltenham) Limited
Companion Care (Chesterfield) Limited
Companion Care (Chichester) Limited
Companion Care (Chingford) Limited
Companion Care (Chippenham) Limited
Companion Care (Christchurch) Limited
Companion Care (Colchester) Limited
Companion Care (Corstorphine) Limited
Companion Care (Coventry Walsgrave) Limited
Companion Care (Cramlington) Limited
Companion Care (Crawley) Limited
Companion Care (Crayford) Limited
Companion Care (Croydon) Limited
Companion Care (Derby Kingsway) Limited
Companion Care (Derby) Limited
Companion Care (Dunstable) Limited
Companion Care (Eastbourne) Limited
Companion Care (Ely) Limited
Companion Care (Enfield) Limited
Companion Care (Exeter Marsh) Limited
Companion Care (Exeter) Limited
Companion Care (Falmouth) Limited
Companion Care (Fareham Collingwood) Limited
Companion Care (Fareham) Limited
Companion Care (Farnborough) Limited
Companion Care (Farnham) Limited
Companion Care (Folkestone) Limited
Companion Care (Fort Kinnaird) Limited
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
30
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
165
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
Company
Companion Care (Friern Barnet) Limited
Companion Care (Gloucester) Limited
Companion Care (Harlow) Limited
Companion Care (Hatfield) Limited
Companion Care (Hemel Hempstead) Limited
Companion Care (High Wycombe) Limited
Companion Care (Hove) Limited
Companion Care (Huddersfield) Limited
Companion Care (Huntingdon) Limited
Companion Care (Ipswich Martlesham) Limited
Companion Care (Keighley) Limited
Companion Care (Kidderminster) Limited
Companion Care (Kings Lynn) Limited
Companion Care (Kirkcaldy) Limited
Companion Care (Leicester Beaumont Leys) Limited
Companion Care (Leicester Fosse Park) Limited
Companion Care (Leighton Buzzard) Limited
Companion Care (Linwood) Limited
Companion Care (Lisburn) Limited
Companion Care (Liverpool Penny Lane) Limited
Companion Care (Livingston) Limited
Companion Care (Llantrisant) Limited
Companion Care (Macclesfield) Limited
Companion Care (Maidstone) Limited
Companion Care (Merry Hill) Limited
Companion Care (Milton Keynes) Limited
Companion Care (New Malden) Limited
Companion Care (Newbury) Limited
Companion Care (Newcastle Kingston Park) Limited
Companion Care (Newport) Limited
Companion Care (Northampton Nene Valley) Limited
Companion Care (Norwich Hall Road) Limited
Companion Care (Norwich Longwater) Limited
Companion Care (Norwich) Limited
Companion Care (Oldbury) Limited
Companion Care (Oldham) Limited
Companion Care (Orpington) Limited
Companion Care (Perth) Limited
Companion Care (Peterborough Bretton) Limited
Companion Care (Peterborough) Limited
Companion Care (Plymouth) Limited
Companion Care (Poole) Limited
166
Pets at Home Group PlcAnnual Report and Accounts 2016 Company
Companion Care (Portsmouth) Limited
Companion Care (Preston Capitol) Limited
Companion Care (Pudsey) Limited
Companion Care (Reading) Limited
Companion Care (Redditch) Limited
Companion Care (Redhill) Limited
Companion Care (Romford) Limited
Companion Care (Rotherham) Limited
Companion Care (Rustington) Limited
Companion Care (Salisbury) Limited
Companion Care (Scarborough) Limited
Companion Care (Slough) Limited
Companion Care (Southampton) Limited
Companion Care (Southend-On-Sea) Limited
Companion Care (Speke) Limited
Companion Care (Stevenage) Limited
Companion Care (Stirling) Limited
Companion Care (Stockport) Limited
Companion Care (Stoke Festival Park) Limited
Companion Care (Stratford-Upon-Avon) Limited
Companion Care (Swansea) Limited
Companion Care (Swindon) Limited
Companion Care (Tamworth) Limited
Companion Care (Taunton) Limited
Companion Care (Telford) Limited
Companion Care (Truro) Limited
Companion Care (Tunbridge Wells) Limited
Companion Care (Wakefield) Limited
Companion Care (Weston-Super-Mare) Limited
Companion Care (Winchester) Limited
Companion Care (Winnersh) Limited
Companion Care (Woking) Limited
Companion Care (Woolwell) Limited
Companion Care (Worcester) Limited
Companion Care (Wrexham Holt Road) Limited
Corby Vets4Pets Limited
Craigavon Vets4Pets Limited
Crewe Vets4Pets Limited
Croydon Vets4Pets Limited
Dagenham Vets4Pets Limited
Darlington Vets4Pets Limited
Davidsons Mains Vets4Pets Limited
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
100
100
50
50
167
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
60
50
50
50
50
50
50
50
50
50
50
75
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
60
50
100
100
50
50
50
50
–
50
50
50
50
50
50
–
50
100
100
100
50
50
50
50
50
50
100
50
50
–
50
50
50
50
–
50
50
–
50
100
Company
Denton Vets4Pets Limited
Dewsbury Vets4Pets Limited
Doncaster Vets4Pets Limited
Dorchester Vets4Pets Limited
Dover Vets4Pets Limited
Drumchapel Vets4Pets Limited
Dudley Vets4Pets Limited
Dumbarton Vets4Pets Limited
Dunfermline Vets4Pets Limited
Durham Vets4Pets Limited
East Kilbride South Vets4Pets Limited
Eastleigh Vets4Pets Limited
Eastwood Vets4Pets Limited
Eccleshill Vets4Pets Limited
Evesham Vets4Pets Limited
Filton Vets4Pets Limited
Gamston Vets4Pets Limited
Gateshead Vets4Pets Limited
Glasgow Forge Vets4Pets Limited
Goldenhill Vets4Pets Limited
Grantham Vets4Pets Limited
Gravesend Vets4Pets Limited
Greasby Vets4Pets Limited
Greenford Vets4Pets Limited
Grimsby Vets4Pets Limited
Guernsey Vets4Pets Limited
Halesowen Vets4Pets Limited
Halifax Vets4Pets Limited
Harrogate New Park Vets4Pets Limited
Harrogate Vets4Pets Limited
Hartlepool Vets4Pets Limited
Hastings Vets4Pets Limited
Hemel Hempstead Vets4Pets Limited
Hendon Vets4Pets Limited
Hertford Vets4Pets Limited
High Wycombe Vets4Pets Limited
Hinckley Vets4Pets Limited
Huddersfield Vets4Pets Limited
Hull Anlaby Vets4Pets Limited
Hull Stoneferry Vets4Pets Limited
Hull Vets4Pets Limited
Ilkeston Vets4Pets Limited
168
Pets at Home Group PlcAnnual Report and Accounts 2016 Company
Ipswich Vets4Pets Limited
Kidderminster Vets4Pets Limited
Kilmarnock Vets4Pets Limited
Lancaster Vets4Pets Limited
Leeds Birstall Vets4Pets Limited
Leigh-On-Sea Vets4Pets Limited
Letchworth Vets4Pets Limited
Lincoln South Vets4Pets Limited
Lisburn Longstone Vets4Pets Limited
Llandudno Vets4Pets Limited
Llanelli Vets4Pets Limited
Llanrumney Vets4Pets Limited
Loughborough Vets4Pets Limited
Luton Gipsy Lane Vets4Pets Limited
Lytham Vets4Pets Limited
Maidenhead Vets4Pets Limited
Maidstone Vets4Pets Limited
Maldon Vets4Pets Limited
Mansfield Vets4Pets Limited
Mapperley Vets4Pets Limited
Marlborough Vets4Pets Limited
Merthyr Tydfil Vets4Pets Limited
Middlesbrough Cleveland Park Vets4Pets Limited
Middleton Vets4Pets Limited
Millhouses Vets4Pets Limited
Newbury Vets4Pets Limited
Newton Abbot Vets4Pets Limited
Newton Mearns Vets4Pets Limited
Newtownabbey Vets4Pets Limited
North Tyneside Vets4Pets Limited
Northampton Riverside Vets4Pets Limited
Northampton Vets4Pets Limited
Oadby Vets4Pets Limited
Old Kent Road Vets4Pets Limited
Oxford Cowley Vets4Pets Limited
Paisley Vets4Pets Limited
Penrith Vets4Pets Limited
Pentland Vets4Pets Limited
Peterborough Vets4Pets Limited
Poole Vets4Pets Limited
Portsmouth Vets4Pets Limited
Prescot Vets4Pets Limited
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
100
50
50
50
50
50
50
50
50
50
50
50
–
–
–
50
–
50
100
50
50
50
100
50
50
50
50
50
50
50
50
50
50
50
169
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Notes (forming part of the financial statements) continued
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
33
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
95
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
–
50
50
50
50
–
50
50
50
–
–
50
50
50
50
100
50
50
100
–
50
50
50
100
–
50
–
50
50
100
50
–
50
50
50
50
50
50
100
100
50
Company
Preston Vets4Pets Limited
Pure Pet Food Ltd
Quinton Vets4Pets Limited
Rayleigh Vets4Pets Limited
Redditch Vets4Pets Limited
Richmond Vets4Pets Limited
Rochdale Vets4Pets Limited
Rotherham Vets4Pets Limited
Rugby Vets4Pets Limited
Ruislip Vets4Pets Limited
Rushden Vets4Pets Limited
Selly Oak Vets4Pets Limited
Sevenoaks Vets4Pets Limited
Sheffield Drakehouse Vets4Pets Limited
Sheffield Vets4Pets Limited
Sheffield Wadsley Bridge Vets4Pets Limited
Sheldon Vets4Pets Limited
Shrewsbury Vets4Pets Limited
Sidcup Vets4Pets Limited
Solihull Vets4Pets Limited
South Shields Quays Vets4Pets Limited
Southampton Vets4Pets Limited
Southend Airport Vets4Pets Limited
Southend-On-Sea Vets4Pets Limited
St Albans Vets4Pets Limited
St Austell Vets4Pets Limited
St Helens Vets4Pets Limited
St Neots Vets4Pets Limited
Stafford Vets4Pets Limited
Stockton Vets4Pets Limited
Stourbridge Vets4Pets Limited
Sutton In Ashfield Vets4Pets Limited
Swindon Bridgemead Vets4Pets Limited
Sydenham Vets4Pets Limited
Thurrock Vets4Pets Limited
Torquay Vets4Pets Limited
Trafford Park Vets4Pets Limited
Trowbridge Vets4Pets Limited
Wakefield Vets4Pets Limited
Walkden Vets4Pets Limited
Wallasey Bidston Moss Vets4Pets Limited
Walsall Reedswood Vets4Pets Limited
170
Pets at Home Group PlcAnnual Report and Accounts 2016 Company
Waltham Abbey Vets4Pets Limited
Walton Vale Vets4Pets Limited
Warrington Riverside Vets4Pets Limited
Warrington Vets4Pets Limited
Washington Vets4Pets Limited
Watford Vets4Pets Limited
Wellingborough Vets4Pets Limited
Weymouth Vets4Pets Limited
Widnes Vets4Pets Limited
Wimbledon Vets4Pets Limited
Wokingham Vets4Pets Limited
Wolverhampton Vets4Pets Limited
Worksop Vets4Pets Limited
Wrexham Vets4Pets Limited
Wsm Vets4Pets Limited
Yate Vets4Pets Limited
Yeovil Vets4Pets Limited
York Clifton Moor Vets4Pets Limited
York Vets4Pets Limited
Holding
Country of incorporation
Class of
shares held
At 31 March
2016 %
At 26 March
2015 %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
50
–
50
100
50
50
50
50
50
50
50
–
50
50
50
50
–
100
100
100
171
Pets at Home Group PlcAnnual Report and Accounts 2016 Financial statements Advisors and contacts
Registered Office
Pets at Home Group Plc
Epsom Avenue
Stanley Green Trading Estate
Handforth
Cheshire
SK9 3RN
United Kingdom
Registered Number
8885072
Investor Relations
investors.petsathome.com
investorrelations@petsathome.co.uk
+44 (0)161 486 6688
Corporate Brokers
Goldman Sachs International
Peterborough Court
133 Fleet Street
London
EC4A 2BB
Bank of America Merrill Lynch
2 King Edward Street
London
EC1A 1HQ
Legal Advisors
Simpson Thacher & Bartlett LLP
CityPoint
One Ropemaker Street
London
EC2Y 9HU
Auditor
KPMG
St James Square
Manchester
M2 6DS
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
172
Pets at Home Group PlcAnnual Report and Accounts 2016 Printed by CPI Colour on Chorus Silk – an FSC® Mix certified grade and is produced at
a mill that is certified to the ISO14001 and EMAS environmental management standards.
Designed and produced by SampsonMay
Telephone: 020 7403 4099
www.sampsonmay.com
Pets at Home Group Plc
Epsom Avenue
Stanley Green Trading Estate
Handforth
Cheshire
SK9 3RN
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Visit our online Annual Report 2016:
petsathome.annualreport2016.com